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Markets for factor inputs

1. Using your knowledge of marginal revenue product, explain the following:

a. A star is paid $200,000 for appearing in a 30-second television commercial. The actor who plays his doubles partner is paid $500.

b. A president of a company is paid not to stay in his job for the last two years of his contract.

c. A jumbo jet carrying 400 passengers is priced higher than a 250-passenger model, even though both aircrafts cost the same to manufacture.

2. The only legal employer of military soldiers in the US is the federal government. If the government uses its knowledge of its monopolistic position, what criteria will it employ when determining how many soldiers to recruit? What happens if a mandatory draft is implemented?

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