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Author Question: XYZ Corporation operates in perfectly competitive input markets and employs labor, capital,land in ... (Read 65 times)

lunatika

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on: Jun 29, 2018
XYZ Corporation operates in perfectly competitive input markets and employs labor, capital,land in its production process. What three conditions must be met for the firm to be maximizing profit?
 
  What will be an ideal response?

Question 2

In your environmental economics study group, a friend argues that using taxes to control pollution is not efficient because, even with taxes, a positive amount of pollution is still produced. Do you agree?
 
  What will be an ideal response?


katkat_flores

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Reply #1 on: Jun 29, 2018
Answer to Question 1

(1.) The marginal revenue product of labor must equal the price of labor.
(2.) The marginal revenue product of capital must equal the price of capital.
(3.) The marginal revenue product of land must equal the price of land.

Answer to Question 2

No, an efficient outcome is not necessarily the one where pollution is completely eliminated. The efficient level of pollution occurs at the point where the marginal benefit from the good that is being produced is equal to the marginal social cost of the good. The marginal social cost includes the costs of pollution.


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