Suppose a firm must pay an annual tax, which is a fixed sum, independent of whether it
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a) How does this tax affect the firm’s fixed, marginal, and average costs?
b) Now suppose the firm is charged a tax that is proportional to the number of items it produces. Again, how does this tax affect the firm’s fixed, marginal, and average costs?
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a This tax is a fixed cost because it does not vary with the quantity of ...View the full answer
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