Q1. Assume that cookie producers create a positive externality equal to $2 per dozen. What is the relationship between the equilibrium quantity and the socially optimal quantity of cookies to be produced?
Q2. Assume that the firm's production function is given by Q = 10KL1/3. The firm's capital is fixed at K. What amount of labor will the firm hire to explain its short-run cost-minimization problem?
Q3. Explain the solution to the firm's cost-minimization difficulty ever occur off the iso-quant representing the required level of output?