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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

The government imposes a $1,000 per year license fee on all pizza restaurants. As a result, which cost curves shift?

a. average total cost and marginal cost

b. average total cost and average fixed cost

c. average variable cost and marginal cost

d. average variable cost and average fixed cost

To determine
Shift in cost curve.

Explanation

Option (b):

If the government imposes a $1,000 per year license fee on all pizza restaurants, then it will lead to the shift of the average total cost and average fixed cost.

Option (a):

Imposing a $1,000 per year fee on restaurants leads to shift the average total cost, but it will not shift the marginal cost. Thus, option ‘a’ is incorrect...

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