Author Question: Suppose that recycling rubber for sneakers creates an external benefit of 2.00 per ton of rubber. ... (Read 139 times)

tuffie · **on:** Jun 29, 2018

Suppose that recycling rubber for sneakers creates an external benefit of 2.00 per ton of rubber. There are no external costs. The efficient amount of rubber will be recycled when the government creates a

A) subsidy of more than 2.00 per ton of rubber.
B) subsidy of 2.00 per ton of rubber.
C) tax of more than 2.00 per ton of rubber.
D) tax of 2.00 per ton of rubber.

Question 2

A worker has a marginal product of 15 units a day, each of which can be sold for 10. Is it profitable to hire this worker if the wage rate is 100 a day? Briefly explain your answer.

What will be an ideal response?

ricroger · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

B

Answer to Question 2

It is profitable to hire this worker because the worker's value of marginal product is 150 a day (the price, 10, times the marginal product, 15 units), which exceeds the wage rate of 100 a day. The worker creates 150 more revenue for the firm at a cost of only 100. Hence it is profitable to hire this worker.