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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 city government is considering two tax proposals:

• A lump-sum tax of $300 on each producer of hamburgers.

• A tax of $1 per burger, paid by producers of hamburgers.

a. Which of the following curves—average fixed cost, average variable cost, average total cost, and marginal cost—would shift as a result of the lump-sum tax? Why? Show this in a graph. Label the graph as precisely as possible.

b. Which of these same four curves would shift as a result of the per-burger tax? Why? Show this in a new graph. Label the graph as precisely as possible.

Subpart (a):

To determine
A fixed cost, average fixed cost, average total cost and average variable cost.

Explanation

Figure -1 shows the average total cost, average variable cost and marginal cost.

Subpart (b):

To determine
A fixed cost, average fixed cost, average total cost and average variable cost.

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