A) If the government imposes a $1 per-unit tax, how do the marginal, average total, and average variable costs change? What if instead the government imposes a $100 per-firm tax? (ASSUME NO CHANGE IN THE AMOUNT OF SALES.)
B) Why are short-run marginal cost curves expected to slope upward?
C) If you know that average costs are increasing, is the marginal cost curve above or below the average cost curve?
D) If you know that marginal costs are increasing, is it necessarily true that the average cost curve is below marginal cost?
E) Why does the average total cost curve always start above the marginal cost curve in the short run?
F) If marginal cost is equal to average cost, what do you know about that point on the average cost curve? Why?© BrainMass Inc. brainmass.com October 24, 2018, 9:23 pm ad1c9bdddf
A per-unit tax (such as an excise tax) will increase the marginal cost by $1. Also, the average total and average variable cost will also increase, becuase of this increase in cost. If instead, the government only imposes a $100 per-firm tax, then the average total cost increases. The marginal cost and average variable cost remains the same because that ...
The solution explains the marginal and average cost concepts in very good detail.
Suppose a business experiences a sudden increase in its fixed costs. For example, suppose property taxes increase dramatically. What impact, if any, will this have the firm's AFC (average fixed cost), AVC (average variable cost), ATC (average total cost) and MC (marginal cost) and therefore these cost curves? Why?View Full Posting Details