The firm negotiates a new agreement with its workers for lower wages. The ATC curve should be __________ and the AFC curve should be __________ after the agreement goes into effect.
A)lower; lower
B)lower; unchanged
C)higher; higher
D)lower; higher
E)unchanged; lower

Question

Quizplus · Accepted Answer

The ATC (Average Total Cost) curve should be lower after the agreement because total costs, including labor costs, decrease. However, the AFC (Average Fixed Cost) curve remains unchanged because fixed costs do not vary with output or changes in variable costs like wages.

The Firm Negotiates a New Agreement with Its Workers for Lower