You have collected the following data on output and total variable costs: ...
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Accounting
You have collected the following data on output and total variable costs:
Q
TVC ($)
10
6,780
20
11,840
30
16,260
40
21,120
50
27,500
60
36,480
70
49,140
80
66,560
90
89,820
100
120,000
a. Identify the range of output exhibiting increasing returns (increasing MP), and the range exhibiting diminishing returns (decreasing MP).
b. Current fixed costs for the company equal $9,300. Draw two graphs, both with Q on the horizontal axis: one graph shows TVC and TC, and the other shows AVC, ATC, and MC.
c. Suppose that the government imposes a $3,600 property tax hike on all businesses; how will that affect your two graphs; i.e., which cost curves will be affected and how?
d. Suppose instead that the government considers your production process to be polluting, and imposes a $94 tax per unit produced (replacing the property tax in the previous question). How does this tax increase compare to the property tax increase, in terms of the effect on your companys cost curves?
e. Your boss says either of these taxes is going to force us to change our production levels. Given what you know about optimization analysis, how would you respond?
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