Ethyl does not like redheads and refuses to hire any at her business. Paul was the perfect job candidate on paper, but the personal interview revealed that he was a redhead. Are there any costs to Ethyl for not hiring Paul?
Economics suggests that this type of discrimination has a cost. In this case, Ethyl does not get the best person for the job. It is likely that her second choice will not be as productive. Also, Paul could end up working for one of Ethyl's competitors. Thus, the competition has improved its position, relative to Ethyl's business.
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To reach an economically efficient output level, the size of an excise tax imposed on a firm generating a negative externality should be
a. the firm's marginal cost. b. the social marginal cost. c. the difference between the social marginal cost and the firm's marginal cost. d. the sum of the social marginal cost and the firm's marginal cost.
Carefully define the following terms, and explain their importance in economics
a. opportunity cost b. abstraction c. theory d. model e. marginal analysis