Answer to Question #125418 in Microeconomics for Sally

Question

What effect would each of the following have on the short-run average marginal costs of an auto dealership
a) auto mechanics receive a 10% wage increase
b) property taxes decrease
c) auto dealers institute a one-time only promotional campaign?

Answer 1

1 - Due to the rise in wages , the wages being a variable cost , the ATC and the MC will both experience a rise.

2 - Property tax is a fixed cost . Thus it will not affect the MC because MC is derived from TVC.

Due to decrease of the property tax , the ATC will decrease.

3 - This is an example of rise of the fixed cost. This will not affect the MC.

But will bring the rise in the ATC.