Consider a firm that uses only one fixed input and one variable input. a . Explain how this firm's ATC, AVC, and AFC curves will be affected by a government tax on the fixed input. b. Explain how this firm's ATC, AVC, and AFC curves will be affected by a government tax on the variable input. c. When would a tax on an input cause the MC curve to change?
a . The AFC and ATC curves shift upward. The AVC curve does not change, because the cost of using the
variable input does not change.
b. The AFC curve does not change, because the cost of using the fixed input does not change. The AVC
and the ATC curves shift upward.
c. The MC curve would shift upward as a result of a tax on the variable input, but would not be affected
by a tax on the fixed input.
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