Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

2. You have collected the following data on output and total variable costs: Q TVC ($) 10 24,850 20 40,800 30 49,950 40 54,400 50

2. You have collected the following data on output and total variable costs:

Q

TVC ($)

10

24,850

20

40,800

30

49,950

40

54,400

50

56,250

60

57,600

70

60,550

80

67,200

90

79,650

100

100,000

  1. Identify the range of output exhibiting increasing returns (increasing MP), and the range exhibiting diminishing returns (decreasing MP).
  2. Current fixed costs for the company equal $11,700. Draw two graphs, both with Q on the horizontal axis: one graph shows TVC and TC, and the other shows AVC, ATC, and MC.
  3. Suppose that the government imposes a $6,750 property tax hike on all businesses; how will that affect your two graphs; i.e., which cost curves will be affected and how?
  4. Suppose instead that the government considers your production process to be polluting, and imposes a $90 tax per unit produced (replacing the property tax in the previous question). How does this tax increase compare to the property tax increase, in terms of the effect on your company's cost curves?
  5. Your boss says "either of these taxes is going to force us to change our production levels." Given what you know about optimization analysis, how would you respond?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Economic Consequences Of The Peace

Authors: John Maynard Keynes

1st Edition

1420905856, 9781420905854

More Books

Students also viewed these Economics questions