How would each of the following affect the firm's marginal, average, and average variable cost curves?
a. An increase in wages
b. A decrease in material costs
c. The government imposes a fixed amount of tax.
d. The rent that the firm pays on the building that it leases decreases.
a. Wages are a variable cost, so MC, AVC, and ATC increase.
b. Materials are a variable cost, so MC, AVC, and ATC decrease.
c. A fixed or lump-sum tax increases ATC but not MC or AVC.
d. Rent is generally viewed as a fixed cost, so ATC decreases, but MC and AVC are unchanged.
You might also like to view...
Refer to Figure 13.3. If exchange rates are floating, an expansionary fiscal policy and the typical Fed response to the change in inflation caused by the fiscal policy would best be represented by a movement from ________ in panel (a) and a
corresponding movement from ________ in panel (b). A) point A to point D; point X to point Y B) point C to point B; point X to point Y C) point D to point A; point Y to point X D) point B to point C; point Y to point X
Which of the following increases demand for a good
A) a rise in the price of a complement B) the expectation that future income will be higher C) an increase in income, assuming the good is an inferior good D) a decrease in the number of buyers E) a fall in the price of a substitute