KHIBIT 13 Effects of Price Elasticity of Demand on Tax Incidence (b) More elastic demand (a) Less elastic demand S+ St S S $1.15 $1.05 $0.20 Tax 1.00 $0.20 Tax 0.95 1.00 per ounce D' Price per ounce 0.85 D 9 10 Millions of ounces 0 10 Millions of ounces per day per daySo s1 A F Price Po E B - P1 D C D Q OAggregate Cost Data Unit Cost Data Total Total Change in Quality of Fixed Variable Total Cost TFC TVC TC MCATC Plot at Output Cost Cost Total Cost (ATC Output 0 5600 SO $600 $300 50 100 600 300 900 100 56.00 53.00 59.00 $3.00 150 200 600 400 3.00 2.00 5.00 1.00 250 300 1050 2.00 1.50 .50 350 400 1150 200 1.50 1.38 2.88 1.00 450 500 500 750 1350 1.20 1.50 2.00 550 600 500 1200 1800 3.00 650 700 2200 2800 85 3.15 10.00 Plot the appropriate data on the graphs on p. 113 and 114 before answering the questions below. Put your answers on a separate sheet of paper. 1. On your graph on page 114: Total Cost per unit ( or "average total cost) is at a minimum at output level(s) of units. 2. On your graph on page 114: Variable Cost per unit ( or "average" variable cost) is at a minimum at output level(s) of _ units. 3. On your graph on page 114: What is the relation between marginal cost - and total cost per unit (or) when - is at its minimum? 4. On your graph on page 114: What is the relation between marginal cost -" and variable cost per unit ( ) when - is at its minimum? 5. Explain why marginal cost on a unit cost graph always intersects total cost per unit and variable cost per unit at their minimum points. 6. On your graph on page 114: What does the difference between the - and -re curve represent? 7. Explain why fixed cost has no influence at all on marginal cost