The production of paper creates pollution, an external cost. What happens to the production of paper if the government imposes a tax on paper producers equal to the marginal external cost of the pollution?
What will be an ideal response?
When the government imposes a tax equal to the marginal external cost of the pollution, the production of paper decreases. Prior to the tax being imposed, the external cost was ignored by the producers because they did not pay this cost. However, once the tax is in place, the external cost now becomes a cost that the producer must pay. As a result, the producers' costs increase and so the supply of paper decreases.
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The value of marginal product of labor
A) is the change in total product that results from selling one more unit of a good. B) is equal to the price of the good produced multiplied by the marginal product of labor. C) is equal to marginal revenue multiplied by the quantity. D) increases as the amount of labor employed increases.
Suppose one firm accounts for 55 percent of the global market share for a product, while 147 other firms account for the remaining 45 percent of the market
With such a large number of buyers and sellers, is this market likely to be competitive? Explain your answer.