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Draw the firm marginal cost and average cost curves

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Reference no: EM132667654

Consider a firm with a total cost function TC = q^(2) + 20q + 225.

a) In a diagram, measuring quantity along the horizontal axis, draw the firm's Marginal Cost and Average Cost curves.

Suppose that the government introduces a $10 per unit seller tax.

b) What is the firm's new total cost function?

c) In the same diagram, illustrate how the tax affects the firm's MC and AC curves. Does the tax affect the firm's MC? Does it affect the firm's minimum efficient scale?

Suppose instead that the government introduces a new licensing fee that raises the firm's recurring fixed cost to 400.

d) In a new diagram draw the firm's MC and AC before and after the introduction of the licensing fee. Does the fee affects' the firm's MC? Does it affect the firm's minimum efficient scale?

Reference no: EM132667654

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