Jon runs a bar in New York City.A city law prevents smoking in New York bars,but Jon is able to convince a friend in city hall to grant his bar a smoking permit by exploiting some fancy loopholes in the law.While smoking enables Jon to charge a premium to the customers (higher drink prices),his workers are subject to second-hand smoke.Therefore Jon has to pay his workers a wage higher than he otherwise would.Assuming Jon's production function is
f(L,K)= L^αK^1-^α,where L is the quantity of workers and K is the quantity of capital,how does Jon's optimal capital-to-labor ratio compare to similar bars without smoking?

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The Answer of Jon runs a bar in New York City.A city law prevents smoking in New York bars,but Jon is able to convince a friend in city hall to grant his bar a smoking permit by exploiting some fancy loopholes in the law.While smoking enables Jon to charge a premium to the customers (higher drink prices),his workers are subject to second-hand smoke.Therefore Jon has to pay his workers a wage higher than he otherwise would.Assuming Jon's production function is f(L,K)= L^αK^1-^α,where L is the quantity of workers and K is the quantity of capital,how does Jon's optimal capital-to-labor ratio compare to similar bars without smoking?

Jon Runs a Bar in New York City