Microeconomics - Increase in Fixed Costs

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timer Asked: Jun 28th, 2018
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Topic: Increase in Fixed Costs

  1. 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 on the following:
    1. the firm's AFC (average fixed cost);
    2. the firm’s AVC (average variable cost);
    3. the firm’s ATC (average total cost); and,
    4. the firm’s MC (marginal cost)?
  2. What changes, if any, is there likely to be in these same cost CURVES?

Tutor Answer

peachblack
School: UCLA

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Running head: INCREASE IN FIXED COSTS

Increase in Fixed Costs
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INCREASE IN FIXED COSTS

2
Question One
Average Fixed Cost

Fixed costs are denoted as the costs that do not vary with output. An increase in the fixed
costs would result in an increase in the average fixed costs. This postulation gives an implication
that the average cost curve would shift outwards. An increase in the average cost has an effect of
increasing th...

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Anonymous
Top quality work from this guy! I'll be back!

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