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a) Consider a firm with total short-run cost function C=a+b.Q. New legislation means that it should pay an environmental tax which is the fixed sum, independent of whether it produces any output. How does this tax affect the firm's fixed cost (FC) marginal cost (MC) and average total cost (ATC)?

b) Now assume that the tax is proportional to the number that it produces. How does this affect the firm's fixed, marginal and average costs.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M9307133

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