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a) Explain the perverse incentive.
b) What makes the incentive perverse?
c) How could the incentive makers better the incentive?
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A film studio in Hollywood produces movies according to the function q = F(K;L) = (2=100)K^0.5L^0.5 In the short run, capital (studios, gear) is xed at a level of 100. It costs $
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