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. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. Average total cost will remain unchanged. Average fixed cost will increase. Average variable cost will remain unchanged. Marginal cost will decrease.

Question

Parker Joyce

Business

21 October, 19:36

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. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. Average total cost will remain unchanged. Average fixed cost will increase. Average variable cost will remain unchanged. Marginal cost will decrease.

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Answers (1)

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Jackrabbit · Answer 1

Average fixed cost will increase.

Explanation:

A cost function is constitued by two components: fixed and average cost. The lump-sum tax does not depend of the quantity produced, is an arbitrary and fixed amount that affects the whole of cost structure. In that sense is considered as a part of fixed costs. On average, this cost will increase.