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Johnson Inc. Property Taxes

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Johnson Inc. is notified that local property taxes have increased. Johnson's economist states this will increase our cost of production and shift up our average total cost curve, average variable cost curve, and marginal cost curve. Is this true? Carefully Explain.

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Solution Summary

This solution deals with the relationship between local property taxes and cost of production, average total cost curve, average variable cost curve, and marginal cost curve.

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Dear student,

Property tax is being classified as fixed cost which doesn't change with respect to the quantity of output produced. Therefore the increase of the property tax will cause the increase of the fixed cost as well as the increase of the total cost ...

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