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PDtax, Master's Degree
Category: Business and Finance Homework
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Suppose a business experiences a sudden increase in its

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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:the firm's AFC (average fixed cost);the firm’s AVC (average variable cost);the firm’s ATC (average total cost); and,the firm’s MC (marginal cost)?What changes, if any, is there likely to be in these same cost CURVES?
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Submitted: 1 year ago.
Category: Business and Finance Homework
Expert:  PDtax replied 1 year ago.

Hi from Just Answer. I'm PDtax, and will assist.

Expert:  PDtax replied 1 year ago.

1. Average fixed cost (AFC): Will go up if fixed cost increases.

2. Average variable cost (AVC): No effect, because it is an independent variable.

3. Average total cost (ATC): Will go up if fixed costs increases.

4. Marginal cost (MC): Will remain the same up as fixed cost increases.

Expert:  PDtax replied 1 year ago.

now to slopes:

If fixed cost rises (FC), this causes movement on our graph, however it is a straight line.

Total costs (TC) and variable costs (VC) are upward sloping, and are parallel to one another.

Average fixed cost (AFC) and average costs (AC) are also upward sloping.

Average total cost (ATC) is upward sloping from the intersection point of marginal cost.

Marginal costs (MC) is upward sloping, however is based upon change in total costs (quantity produced changes by one unit); it is NOT based upon fixed costs.

Expert:  PDtax replied 1 year ago.

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