Intermediate Microeconomics and Its Application 12th Edition by Walter Nicholson,Christopher Snyder

Exercise 40

Suppose that a monopoly farmer of Wonder Grain must pay all of its costs of production in this year but that it must wait until next year to sell its output. Why would the farm's profit-maximizing output be the level for which MR= MC(1+r)? Explainwhy this profit-maximizing condition takes all costs into account. Would this farmer produce more or less output if he or she could defer paying costs until next period? Explain why the firm should also hire any input, such as labor, up to the point at which MRPL=w(1+r).