The city government is considering two tax proposals:
- A lump-sum tax of $300 on each producer of hamburgers
- A Tax of $1 per burger, paid by producers of hamburgers.
a. Which of the following curves - average fixed cost, average variable cost, average total cost, and marginal cost - would shift as a result of the lump-sum tax? Why? Show this in a graph. Label the graph as precisely as possible.
b. Which of these same four curves would shift as a result of the per-burger tax? Why? Show this in a graph. Label the graph as precisely as possible.