If the government levies a $1 excise tax on each unit of a good sold, what will happen to the producer's cost curve?
A) The average total cost and marginal cost curves will shift downward by the amount of the tax.
B) The average total cost and marginal cost curves will shift upward by the amount of the tax.
C) The marginal cost curve will shift upward by the amount of the tax; the average total cost curve will remain unchanged.
D) Both the marginal cost and average total costs will remain the same since taxes are not a cost of production.
Correct Answer:
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