Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. Refer to Figure 9-5. If the firm’s fixed cost increases by $1,000 due to a new environmental 68. regulation, what happens in the diagram above?
a. Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected.
b. All the cost curves shift upward.
C. Only the average variable cost and average total cost curves shift upward; marginal cost is not affected.
d. None of the curves shift; only the fixed cost curve, which is not shown here, is affected.
Answer: a. Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected.
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