Marginal physical product measures the increase in total output that results from a one-unit increase in an input.

Suppose that in the market for paper, demand is p = 100 - Q. The private marginal cost is MCp = 10 + Q. Pollution generated during the production process creates external marginal harm equal to MCe = Q. What specific tax would result in a competitive market producing the socially optimal quantity of paper?

What will be an ideal response?

The greater the marginal propensity to consume in the economy, the smaller the spending multiplier

a. True b. False Indicate whether the statement is true or false