Economics: Principles, Problems, and Policies, 19th Edition

Published by McGraw-Hill Education
ISBN 10: 0073511447
ISBN 13: 978-0-07351-144-3

Chapter 7 - Businesses and the Costs of Production - Questions - Page 161: 8e

Answer

The average fixed cost curve would remain unchanged. The average variable cost curve will move upward uniformly. The total cost curve would move upward uniformly. The marginal cost curve would remained unchanged.

Work Step by Step

Since wages of production workers are variable costs, there are no changes in the fixed cost (ceteris paribus), the average fixed cost curve will remain unchanged. Transportation are variable costs as they vary with output in the short run and they can be changed in the short run,. Thus, an increase in transportation costs would see variable cost at every output level increasing uniformly. Thus, the average variable cost curve would move upward uniformly. The increase in the average total cost is due to the increase in the average variable cost (total cost is the addition of variable and fixed cost). Since the average variable cost curve increases uniformly, the total cost curve would also move downward uniformly. Since the marginal cost curve is derived from the gradient of the total cost curve, and the total cost curve’s gradient remained unchanged (it merely moved downward), the marginal cost curve would remain unchanged as the gradient stays the same.
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