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Does the dummy player remove a room or monster when its Hire Monsters or Build Room action resolves?

No. The dummy player does nothing. It just blocks one space of three different actions.

During development of the game, there was a rule that the dummy player took the leftmost monster (or ghost) when placed on the Hire Monster order. This rule was later abandoned, as it was too restricting and players tended to forget it, but if you want, feel free to use this rule.