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Q3: Land Contracts Peter can work at the hourly wage of w=1 euro per hour. Paul owns a plot of land with the following production

Q3: Land Contracts

Peter can work at the hourly wage of w=1 euro per hour. Paul owns a plot of land with the following production function: y=h^a =h^0.5 where h is hours work and Y is output. The price of output p equals 10. There is no uncertainty. If Paul wishes to offer Peter a fixed rent contract for the plot, what is the maximum rent he can charge?

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