In the section of the textbook headed "Marginal Principle: Let Bygones By Bygones," it is emphasized that a firm, in setting output and price according to MR=MC, will disregard fixed cost. This does not mean that fixed cost can be ignored completely; maximum profits could be negative, for example, if fixed costs were too large. Nonetheless, in the determination of the profit-maximizing production/sales point, marginal revenue and marginal cost are the critical parameters.

A. Suppose that a monopolist's fixed cost increase, perhaps because a flat tax is levied against the firm's property. Would this tax raise the firm's AC curve? (YES or NO)

B. would the tax affect the monopolist's variable cost or the AVC curve? (YES or NO)

C. would the tax affect the monopolist's marginal cost curve? (YES or NO)

D. If the MC curve were unaffected, should such a flat tax change the maximum-profit output? (Presumably the tax would not affect output demand, so it would have no effect on marginal revenue.) (YES or NO, unless the firm is forced out of business)

E. If the tax did not affect MC, MR or maximum-profit output, would the price be changed? (YES or NO)