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Sometimes we use math to determine precise cost curves. Other times, we must rely on our economic intuition to determine how various situations will impact our firm's cost curves. For each of the four scenarios below, determine how each event would affect our firm's marginal, average, and average variable cost curves. Consider each situation independently.

a. An increase in employee wages
b. A decrease in material costs
c. The government imposes a fixed amount of tax (i.e. it is not a percentage tax but a fixed dollar amount)
d. The rent that the firm pays on their building lease decreases.

Macroeconomics, Economics

  • Category:- Macroeconomics
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