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The city government is considering two tax proposals: • A lump-sum tax of $300 on each producer of hamburgers. • A tax of $1 per burger, paid by producers of hamburgers. Which of the following statements is true as a result of the lump-sum tax? Check all that apply. Average total cost will remain unchanged. Average fixed cost will increase. Average variable cost will remain unchanged. Marginal cost will decrease.

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Answer:

Average fixed cost will increase.

Explanation:

A cost function is constitued by two components: fixed and average cost. The lump-sum tax does not depend of the quantity produced, is an arbitrary and fixed amount that affects the whole of cost structure. In that sense is considered as a part of fixed costs. On average, this cost will increase.

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