Kananelo Enterprises' average total cost curve $(A T C)$ has shifted up, but its average variable cost curve $(A V C)$ and marginal cost curve $(M C)$ haven't changed.

Which of the following would cause the change in $A T C$, but not affect $A V C$ or $M C ?$

Choose 1 answer:
(A) a tax on a variable cost of production
(B) a tax on a fixed cost of production
(c) a decline in productivity
(D) an improvement in productivity
(E) a decrease in average fixed costs

Question

Kananelo Enterprises' average total cost curve $(A T C)$ has shifted up, but its average variable cost curve $(A V C)$ and marginal cost curve $(M C)$ haven't changed.

Which of the following would cause the change in $A T C$, but not affect $A V C$ or $M C ?$

Choose 1 answer:
(A) a tax on a variable cost of production
(B) a tax on a fixed cost of production
(c) a decline in productivity
(D) an improvement in productivity
(E) a decrease in average fixed costs

Accepted Answer

∻Solution∻ ‖ a ⋮ Analysis of Cost Curves: The average total cost (ATC) curve includes both fixed and variable costs, while the average variable cost (AVC) and marginal cost (MC) curves only include variable costs. ‖‖ b ⋮ Impact of Fixed Costs: A tax on a fixed cost of production would increase the ATC but not affect the AVC or MC, as these curves are only influenced by variable costs. ‖ ∻Answer∻ ⚹ (B) a tax on a fixed cost of production ⚹ ∻Key Concept∻ ⚹ Fixed Costs and Cost Curves ⚹ ∻Explanation∻ ⚹ A tax on a fixed cost of production increases the average total cost (ATC) because fixed costs are part of the total costs. However, it does not affect the average variable cost (AVC) or marginal cost (MC) since these are only influenced by variable costs. ⚹◊What impact would a tax on fixed costs have on Kananelo Enterprises' average total cost curve compared to its average variable cost and marginal cost curves⍭ Generate me a similar question◊

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