How would a $10 increase in an avoidable fixed cost effect a price-taking firm's supply curve?
A) MC would increase by $10 and AC would not change
B) AC would increase by $10 and MC would not change
C) MC and AC would both decrease by $10
D) MC and AC would both increase by $10

Question

Quizplus · Accepted Answer

An avoidable fixed cost is not directly related to production or output, so it does not affect MC. However, it would increase total fixed costs, which would be spread out over the same level of output, causing an increase in AC. As a result, the supply curve would shift upward by the amount of the increase in AC.

How Would a $10 Increase in an Avoidable Fixed Cost