Answer:
The ATC curve should be LOWER and the AFC curve should be UNCHANGED after the agreement goes into effect.
Explanation:
The average total cost (ATC) includes direct labor costs, and if labor costs decrease, the ATC should also decrease in the same amount. The average fixed cost (AFC) does not include direct labor costs, so lower labor costs will not affect it.
Average total costs is the average unit cost, and it includes a fraction of both manufacturing and sales and administrative expenses. Average fixed costs is calculated by dividing the total fixed costs by the number of units produced. Fixed costs are incurred expenses that do not vary depending on the total output of the company.
