University:
Kentucky State University
Course:
ECO 301 | Microeconomics
Academic year:

2022
Views:

175

Pages:

3
Author:

Prince Sampson

Phan Như Ý - MSSV: QS170067 Chapter 13 - 8: 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. Solution: a. As a result of lump-sum tax, the average fixed cost curve and the average total cost curve would shift because the lump-sum tax increases the fixed cost but has no effect on marginal cost and variable cost. Therefore, the fixed cost curve and the average total cost curve would shift upward. b. The average cost curve, average total cost curve and marginal cost curve would shift because the per-burger tax increases the variable cost per unit produced but has no effect on fixed cost. Therefore, these three curves would shift upward. 