Question

please answer the effects at the bottom.

the choices are:

- shift upward

- shift downward

- no change

4. Cost-curve shifters Aa Aa E The following graphs depict the costs and expenses in the short run and the long run for Xavier's Pizza Place. Xavier must pay $200 per month to rent pizza ovens (including sales tax) and $15 per hour for his workers. He also pays an additional $2,000 a month for a license that allows him to sell beer at his pizza parlor. Short Run Long Run DOLLARS DOLLARS OUTPUT OUTPUT Now, suppose the sales tax on oven rentals is removed, so the monthly price of ovens decreases to $175 per month.. Fill in the following table with information on how each curve is affected, if at all. Effect? Short-Run Curve Marginal cost Average cost Average expenditures Effect? Shifts upward L Long-Run Curve Marginal cost Average variable cost Average cost

Answer 1

(1) In short run, lower price of fixed asset (oven) decreases ATC, MC, TFC and AFC.

Marginal cost - Shift downward

Average cost - Shift downward

Average expenditure - Decrease

(2) In long run, fixed cost doesn't exist and all costs are variable, so lower price of fixed asset doesn't impact variable cost.

Marginal cost - No change

Average variable cost - No change

Average cost - Shift downward