Microeconomics – Increase in Fixed Costs
Increase in Fixed Costs
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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?
