Question

Using a diagram showing a firm’s short-run ATC, AVC and MC curves, compare and contrast the...

Using a diagram showing a firm’s short-run ATC, AVC and MC curves, compare and contrast the effect of imposing either a $1 per unit excise tax or a $100 lump-sum tax on the firm.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

(a) A per-unit tax will increase AVC, ATC and MC, therefore all these curves will shift upward. In following graph, after the tax, the curves will shift upward from AVC0, ATC0 and MC0 to AVC1, ATC1 and MC1 respectively, with MC0 intersecting AVC0 and ATC0 at their minimum points, and MC1 intersecting AVC1 and ATC1 at their minimum points.

(b) A lump-sum tax will increase ATC, leaving other two cost curves unchanged. So ATC curve will shift upward. In following graph, after the tax, the ATC curve will shift upward from ATC0 to ATC1, with MC0 intersecting AVC0, ATC0 and ATC1 at their minimum points.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1.Describe the way in which short-run AFC, AVC, ATC, and MC vary as the output of...
1.Describe the way in which short-run AFC, AVC, ATC, and MC vary as the output of the firm increases? 2.What are the connections between MP and MC and AP and AVC? How will MC behave as MP increase or decrease? How will AVC change as AP rises or falls? 3.What are the precise relationships between MC and minimum AVC, and between MC and minimum ATC?
. In a perfectly competitive industry a). Draw a firm’s MC, ATC, AVC curves b). On...
. In a perfectly competitive industry a). Draw a firm’s MC, ATC, AVC curves b). On the industry side, show the market price such that the firm is making a positive amount of profit. On the firm’s diagram, label the optimal output the firm will produce as q*, the profit this firm will make. c) Using another set of firm and industry diagrams, show the market price such that the firm is making zero profit. Label firm’s optimal output. Why...
16) In the short-run cost analysis, when a firm’s marginal cost (MC) is unavailable, the best...
16) In the short-run cost analysis, when a firm’s marginal cost (MC) is unavailable, the best alternative of MC is its a) average total cost (ATC) b) average fixed cost (AFC) c) total variable cost (TVC) d) average variable cost (AVC) 19) Which of the following is NOT a market characteristic for monopoly? a) One firm is the only supplier of a product. b) Entry into the market is blocked. c) The firm can influence market price though output decision-making....
1.        Is the basic difference between the short run and the long run that the...
1.        Is the basic difference between the short run and the long run that the law of diminishing returns applies in the long run, but not in the short run? 2.        Draw a typical production function and explain its shape. Below that diagram, draw an average product schedule and marginal product schedule. Indicate the relationship between the two diagrams. ##3         Explain why the marginal product of labour initially increases as more workers are hired and then eventually...
Fill in the table for a perfectly competitive firm. Output VC TC AVC AFC ATC MC...
Fill in the table for a perfectly competitive firm. Output VC TC AVC AFC ATC MC P TR PROFIT 0 100 --- --- --- --- 50 1 25 50 2 20 3 53.3 4 17.5 5 90 6 30 7 265 8 41.3 9 35 10 425 A perfectly competitive firm’s demand curve is perfectly elastic.
Q. Output       AFC          AVC        ATC    MC               0 &nbs
Q. Output       AFC          AVC        ATC    MC               0         $ 300            $ ---          $ ---         $ ---            1    300    100          400         100            2         150                75            225         50            3         100                 70          170          60             4           75                 73         148         80             5          60                   80       140        110             6          50 90       140         140             7           43                 103        146      180             8            38                 119        156      230              9           33                 138         171      290              10         ...
For this activity, you must apply formulas for total variable cost, average variable cost, average total...
For this activity, you must apply formulas for total variable cost, average variable cost, average total cost, and marginal cost, and use these computations to determine maximum profit A firm’s cost curves are given in the following table: Q TC TFC TVC AVC ATC MC 0 100 100 1 155 100 2 195 100 3 215 100 4 245 100 5 300 100 6 360 100 7 435 100 8 515 100 9 605 100 a) Complete the table. b)...
Consider a firm with the production function f(L,K)=L1/2K2 Suppose the firm is in the short run...
Consider a firm with the production function f(L,K)=L1/2K2 Suppose the firm is in the short run and has a level of capital K = 1. If the cost of labor is w=2 and the cost of capital is r=2, derive the a) TVC, b) TFC, c) TC, d) MC, e) ATC, f) AVC, ) AFC. Draw these curves in a relevant set of well-labelled diagrams. Repeat the exercise if the firm was in the short run with a capital level...
A firm estimated its short-run costs using an average variable cost function of the form AVC...
A firm estimated its short-run costs using an average variable cost function of the form AVC = a + bQ + cQ2 And obtained the following results. Total fixed cost is $1,500.         DEPENDENT VARIABLE: AVC R-SQUARE F-RATIO P-VALUE ON F OBSERVATIONS: 40 0.8273 88.65 0.0001 VARIABLE PARAMETER ESTIMATE STANDARD ERROR T-RATIO P-VALUE INTERCEPT 38.05 11.87 3.21 0.0028 Q -4.20 1.56 -2.69 0.106 Q2 0.30 0.09 3.33 0.0020 The estimated marginal cost function is: MC = 38.05 – 8.4Q + 0.9Q2...
With TC=8+Q+Q^2 (MC= 1 + 2*Q), and (separately) Prices 11, 5: a. Find Profit max Q....
With TC=8+Q+Q^2 (MC= 1 + 2*Q), and (separately) Prices 11, 5: a. Find Profit max Q. b. Total Profit per unit at profit max Q. c. Profit per unit at profit max Q d. ATC at profit max Q e. AVC at profit max Q f. Should the firm shutdown in the short run given these conditions?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT