You have collected the following data on output and total variable costs:

Qb TVC ($)

1 69

2 118

3 152

4 . 177

5 . 198

6 . 218

7 . 243

8 . 279

9 . 330

10 . 400

Current fixed costs for the company equal $230. Draw two graphs, both with Q on the horizontal axis: one graph shows TVC and TC, and the other shows AVC

AC, and MC. Suppose that the government imposes a $65 property tax hike on all businesses; how will that affect your two graphs; i.e., which cost curves will be affected and how?

Select one:

a. The property tax will shift up TC by $65 and AC by $65/Q (i.e., $65 divided by Q)

b. TC and AC will both shift up by $65/Q (i.e., $65 divided by Q

c. MC will shift up by the amount of the tax (i.e., by $65).

d. TC will shift up by $65 while AC and MC will shift down by $65/Q . (i.e., $65 divided by Q)

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