Principles of Economics, 7th Edition

Published by South-Western College
ISBN 10: 128516587X
ISBN 13: 978-1-28516-587-5

Chapter 13 - Part V - The Costs of Production - Quick Check Multiple Choice - Page 276: 5

Answer

b. average total cost and average fixed cost.

Work Step by Step

A license fee is a one-time fixed cost. Regardless of whether production of pizzas happens or not, a restaurant will have to pay this license fee. Hence, the fixed cost is bound to shift. As the total cost is a summation of the fixed and variable costs, any change in these will lead to a change in the total cost curve as well. Hence, we will observe both the average total cost and the average fixed cost curves shifting as a result.
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