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In the course of producing its output, a firm causes pollution. The government passes a law...

In the course of producing its output, a firm causes pollution. The government passes a law that requires the firm to stop polluting, and the firm dis-covers that it can prevent the pollution by hiring x workers for every worker that is producing output. That is, if the firm hires N workers, then xN workers are required to clean up the pollution caused by the N workers who are actually producing output. Deter-mine the effects of the pollution regulation on the firm’s profit-maximizing choice of labour input and on the firm’s labour demand curve.

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Rahul Sunny answered 2 years ago
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