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Question 2 . If a monopolist uses L workers to produce q units of output, its profit is given by ( q , L )

Question 2. If a monopolist uses L workers to produce q units of output, its profit is
given by
(q,L)=q(a-bq)-wL
where a,b are positive constants and w is the wage rate.
(a) Interpret this equation.
(b) Assume a production function q=L12. Using the method of Lagrange multipliers, find
the firms' optimal employment choice L**. How does employment change as productivity
increases. Why does the sign depend on w?
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