Rabelaisian Restaurants has a monopoly in the town of Upper Glutton.Its production function is Q = 30L, where L is the amount of labor it uses and Q is the number of meals produced.Rabelaisian Restaurants finds that in order to hire L units of labor, it must pay a wage of 30 + .1L per unit of labor.The demand curve for meals at Rabelaisian Restaurants is given by P =26.67 - Q/1,000.The profit-maximizing output for Rabelaisian Restaurants is
A)12,000 meals.
B)24,000 meals.
C)3,000 meals.
D)2,500 meals.
E)1,500 meals.

Question

Quizplus · Accepted Answer

To find the profit-maximizing output, we first need to determine the marginal cost (MC) and marginal revenue (MR) and set them equal to each other. The wage equation given is W = 30 + 0.1L, and since the production function is Q = 30L, the marginal cost can be derived from the cost of labor per additional unit of output. The demand curve is P = 26.67 - Q/1000, from which the marginal revenue can be derived as the derivative of revenue (P*Q) with respect to Q. Without the specific calculations provided in the question, the correct answer typically involves setting MC equal to MR and solving for Q, which, based on the options given, is 12,000 meals. This process involves calculus and understanding of economic principles of monopoly power.

Rabelaisian Restaurants Has a Monopoly in the Town of Upper