Unit 7 Discussions and Assignments

Microeconomics Unit 7 Discussion

Increase in Fixed Costs

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:

a) the firm's AFC (average fixed cost);

b) the firm’s AVC (average variable cost);

c) the firm’s ATC (average total cost); and,

d) the firm’s MC (marginal cost)?

What changes, if any, is there likely to be in these same cost CURVES?