a. A reduction in business property taxes MC No change b. An increase in the nominal wages of production workers MC AVC Shift down MC Shift down AVC AFC Shift down Shift up Shift up c. A decrease in the price of electricity AVC Shift down AFC No change AFC No change ATC Shift down ATC Shift up ATC ✓ Shift down
a. A reduction in business property taxes MC No change b. An increase in the nominal wages of production workers MC AVC Shift down MC Shift down AVC AFC Shift down Shift up Shift up c. A decrease in the price of electricity AVC Shift down AFC No change AFC No change ATC Shift down ATC Shift up ATC ✓ Shift down
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:**Effects of Various Factors on Cost Curves**
This educational resource outlines how different economic factors can shift the following cost curves of a manufacturing firm: Marginal Cost (MC), Average Variable Cost (AVC), Average Fixed Cost (AFC), and Average Total Cost (ATC).
**a. A reduction in business property taxes:**
- **MC:** No change
- **AVC:** Shift down
- **AFC:** Shift down
- **ATC:** Shift down
**b. An increase in the nominal wages of production workers:**
- **MC:** Shift up
- **AVC:** Shift up
- **AFC:** No change
- **ATC:** Shift up
**c. A decrease in the price of electricity:**
- **MC:** Shift down
- **AVC:** Shift down
- **AFC:** No change
- **ATC:** Shift down
**d. An increase in insurance rates on plant and equipment:**
- **MC:** No change
- **AVC:** No change
- **AFC:** Shift up
- **ATC:** Shift up
**e. An increase in transportation costs:**
- **MC:** Shift up
- **AVC:** Shift up
- **AFC:** No change
- **ATC:** Shift up
These tables indicate how each factor specifically influences the cost curves, either causing them to shift up or down, or leaving them unchanged. Understanding these shifts is crucial for making informed economic decisions in a manufacturing context.
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