Suppose the marginal product of the second worker hired by a firm is 3, and the price of the last unit produced is 7 . Which of the following is true of the marginal revenue product of the second worker?
a. It must equal 21.
b. It must be less than or equal to 21.
c. It must be greater than or equal to 21.
d. It equals 21 only if the firm is a price searcher (e.g., monopoly).
e. We can conclude nothing about marginal revenue product.
Question 2
A government passes a new law allowing only 1,000 tons of pollution per day to be generated and simultaneously sells 1,000 transferable rights to emit one ton each of pollution per day. Which of the following is true?
a. The pollution will be created by those least willing and able to pay the damages.
b. The pollution will be created by those most willing and able to pay for the right to pollute.
c. The funds collected by the government will be enough to compensate any individuals harmed by the pollution.
d. Pollution will increase from zero to 1,000 units per day.
e. There will be no incentive for polluters to try to sneak emissions past government monitoring devices.
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