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Problem: Kendall Square Inc makes and sells ramen to the large number of students around MIT. Kendall Square Inc uses the production function F(K,L)=(K+2L)^(1/3). Input prices are w=2 and r=3 for labor and capital respectively. It operates in a perfectly competitive environment facing a price p=$48, and uses an initial amount of capital K^=12.
Required:
What is the optimal output level for Kendall Square, Inc in the short run?, What are its profits in the short run?, and what is the long-run cost function?
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