Effect of tax on fixed-marginal and average costs

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Suppose a firm must pay an annual tax, which is a fixed sum, independent of whether it produces any output.

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?

Reference no: EM1315758


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