Answer to Question #56885 in Microeconomics for Nasser

Question

For each of the following events, explain the effect it would have on a pizza restaurant's short-run costs. Draw a separate graph asked in each part.
(a) The payment for fire insurance policy increases. Draw the change in the AFC and TFC curves if they change.

(b) the payment to buy pizza dough decreases. draw the change in the MC curve if it changes.

(c) the wages to the workers increase. draw the change in the TC curve if it changes.

(d) the restaurant doubles its advertising budget. draw the change in the ATC curve if it changes.

Answer 1

(a) If the payment for fire insurance policy increases, then the AFC and TFC curves will increase and shift up.

(b) If the payment to buy pizza dough decreases, then the MC curve will decrease and shift down.

(c) If the wages to the workers increase, then the TC curve will increase and shift up.

(d) If the restaurant doubles its advertising budget, then the ATC curve will increase and shift up.