Figure 7-2
-Al's Donuts produces about 600 dozen doughnuts daily.If flour prices increase 20 percent,
A)only marginal cost will shift up.
B)only marginal cost and average total cost will shift up.
C)marginal cost, average variable cost, and average total cost will shift up.
D)marginal cost, average total cost, average variable cost, and average fixed cost will shift up.

Question

Figure 7-2 
-Al's Donuts produces about 600 dozen doughnuts daily.If flour prices increase 20 percent,
A)only marginal cost will shift up. 
B)only marginal cost and average total cost will shift up. 
C)marginal cost, average variable cost, and average total cost will shift up. 
D)marginal cost, average total cost, average variable cost, and average fixed cost will shift up.

Quizplus · Accepted Answer

An increase in flour prices raises the cost of producing each doughnut, affecting the variable costs. Since marginal cost (MC), average variable cost (AVC), and average total cost (ATC) all include variable costs, they will all shift up. Average fixed cost (AFC) remains unchanged because it is not affected by changes in the cost of variable inputs like flour.

Figure 7-2 -Al's Donuts Produces About 600 Dozen Doughnuts Daily.If Flour Prices