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Problem 4: Extension of Monopoly with Variable Proportions. A monopolist sells shoe making machines to a perfectly competitive market of shoe manufacturers. The marginal cost
Problem 4: Extension of Monopoly with Variable Proportions. A monopolist sells shoe making machines to a perfectly competitive market of shoe manufacturers. The marginal cost of producing a shoe machine is 1. A shoe manufacturer can use combinations of machines and labor to produce shoes. If a shoe manufacturer uses K machines and L units of capital, it can produce Q = L X K2 shoes. Price of labor is PL = 1
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