How will an increase in physical capital affect labor productivity, labor demand, and potential GDP?
What will be an ideal response?
An increase in capital increases labor productivity. It shifts the production function upward and, because productivity has increased, it increases the demand for labor. Equilibrium employment increases because of the increase in demand for labor. Potential GDP increases because employment increases and because the production function has shifted upward.
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The largest source of federal government revenue in the United States is
A) corporate income taxes. B) individual income taxes. C) payroll taxes. D) excise taxes.
A steel factory has the right to discharge waste into a river. The waste reduces the number of fish, causing damage for fisheries. Let X denotes the quantity of waste dumped. The marginal damage, denoted MD, is given by the equation MD = 2 + 5Q. The marginal benefit (MB) of dumping waste is given by the equation MB = 34 - 3Q.
(a) Calculate the efficient quantity of waste. (b) What is the efficient fee, in dollars per unit of waste, which would cause the firm to dump only an efficient quantity of waste? (c) What would be the quantity dumped if the firm did not care about the fishery?