How would each of the following affect the firm's marginal, average, and average variable cost curves?
a. There is an increase in wages?
b. There is a decrease in material costs?
c. The government imposes a fixed amount of tax?
d. The rent that the firm pays on the building that it leases decreases?
a. Wages are a variable cost, so MC, AVC, and ATC increase.
b. Materials are a variable cost, so MC, AVC, and ATC decrease.
c. A fixed or lump-sum tax increases ATC but not MC or AVC.
d. Rent is generally viewed as a fixed cost, so ATC decreases, but MC and AVC are unchanged.
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