Question

Every candle maker in Town A must have a license. The cost of a license is the same regardless of the number of candles a business produces. Assume that the candle market is perfectly competitive.

i. Does this license shift a candle​ maker's short-run average fixed cost​ curve?

ii. Does this license shift a candle​ maker's short-run average variable cost​ curve?

iii. Does this license shift a candle​ maker's short-run​ profit-maximizing choice of the number of candles to​ produce?
With the​ license, the​ short-run average fixed cost curve_____________ and the​ short-run average variable cost curve_______________

Answer 1

Answer:i. Does this license shift a candle​ maker's short-run average fixed cost​ curve?

This licence will shift the candle makers short run average fixed cost curve to the left as producing candles will be more costly now because of this license.

Does this license shift a candle​ maker's short-run average variable cost​ curve?

This license will not affect the average variable cost curve as the cost of the license is fixed and stays the same regardless the number of candles a business produces.

Does this license shift a candle​ maker's short-run​ profit-maximizing choice of the number of candles to​ produce?

Because this cost will shift the supply curve to the left the candle makers short run profit maximizing choice of the number of candles will decrease.

Step-by-step explanation: