After the ban is imposed, Joe’s firm switches to the more expensive biodegradable disposable cups. This increases the cost associated with each cup of coffee it produces.
- Which cost curve(s) will be impacted by the use of the more expensive biodegradable disposable cups? Why? Which cost curve(s) will not shift, and why not? Please use the table below to answer this question. For the second column (“Impacted? If so, how?”), please use one of the following three choices: No shift; Shifts up (i.e., increases: at nearly any given quantity, the cost goes up); or Shifts down (i.e., decreases: at nearly any given quantity, the cost goes down). $
|
Cost Curve |
Impacted? If so, how? |
Explanation of the Shift: Why or Why Not |
|
AFC |
No shift. |
Fix costs stay the same, regardless of quantity. Fixed cost is calculated as Fixed Cost/Quantity. Since fixed costs remain unchanged, AFC stays the same for each quantity. |
|
MC |
Shifts up. |
Since the biodegradable cups are more expensive, the cost increase with each additional unit. Marginal cost is the change in total cost and as more units are produced and each additional unit is more expensive, the marginal cost curve will shift upward at all quantity levels. |
|
AVC |
Shifts up. |
When the cost per cup increases, the total variable cost increases at each quantity. |
|
ATC |
Shifts up. |
Average Total Cost if the Avg fixed cost + avg variable cost. The higher costs of the cups increase the total cost of production at quantity, raising the entire ATC curve. |
Use a copy of the graph you created in Question 1 to depict the new positions of any of $curves which depicted the use of inexpensive styrofoam containers. Please label the new curves with subscript 1.
Step by step
Solved in 2 steps with 1 images
