Lump-Sum Tax

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Southern New Hampshire University *

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201

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Economics

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Feb 20, 2024

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Uploaded by kbeasley0816

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. v Average total cost will increase. v Average variable cost will remain unchanged. X (J Average fixed cost will increase. v (J Marginal cost will increase. Points: (IR~ 0.75/ 1 Which of the following statements is true as a result of the per-burger tax? Check all that apply. v Average total cost will increase. v (J Marginal cost will remain unchanged. v Average variable cost will increase. v (O Average fixed cost will increase. Points: (S 1/ 1 Explanation: Close Explanation »~ The lump-sum tax causes an increase in fixed cost. Therefore, only average fixed cost and average total cost will rise in this case. A per-unit tax increases variable cost at an increasing rate. For example, it increases the variable cost of producing 20 burgers by $20, but it increases the variable cost of producing 21 burgers by $21. Therefore, average variable cost, average total cost, and marginal cost will all be greater under this proposal, and average fixed cost will be unaffected. See Sections: Fixed and Variable Costs; and Average and Marginal Cost. 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. v Average fixed cost will increase. v (O Marginal cost will decrease. v Average variable cost will remain unchanged. v (O Average total cost will remain unchanged. Points: mummmmm 1/ 1 Which of the following statements is true as a result of the per-burger tax? Check all that apply. X [J Average fixed cost will remain unchanged. v Average variable cost will increase. v (O Marginal cost will remain unchanged. v Average total cost will increase. Points: g 0.75/1

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