The government imposes a $1,000 per year licensefee on all pizza restaurants. As a result, which costcurves shift?a. average total cost and marginal costb. average total cost and average fixed costc. average variable cost and marginal costd. average variable cost and average fixed cost

The government imposes a $1,000 per year licensefee on all pizza restaurants. As a result, which costcurves shift?a. average total cost and marginal costb. average total cost and average fixed costc. average variable cost and marginal costd. average variable cost and average fixed cost

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section: Chapter Questions

Problem 5CQQ

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Question

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

Definition Definition Measure of the cost of production per unit of output, including only variable costs such as wages, materials, and utilities. AVC is calculated by dividing total variable cost by the number of units produced. Understanding average variable cost is important for businesses to make decisions on pricing, production levels, and profitability.

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Average cost curves (except for avenge fixed cost) tend to be U-shaped, decreasing and then increasing. Marginal cost curves have the same shape, though this may be harder to see since most of the marginal cost curve is increasing. Why do you think that average and marginal cost curves have the same general shape?
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