The figure above shows some of a firm's cost curves.
-A firm's rent is a fixed cost.If the rent increases,then in the figure above ________ upward.
A) only curve A shifts
B) only curve B shifts
C) only curve C shifts
D) both curves A and C shift
E) both curves B and C shift

Question

The figure above shows some of a firm's cost curves.
-A firm's rent is a fixed cost.If the rent increases,then in the figure above ________ upward.
A) only curve A shifts 
B) only curve B shifts 
C) only curve C shifts 
D) both curves A and C shift 
E) both curves B and C shift

Quizplus · Accepted Answer

Rent is a fixed cost, which means it does not change with the level of output. Therefore, an increase in rent will not affect the firm's marginal cost curve (curve B). However, it will increase the firm's total cost curve (curve C), which will shift upward. Since the average variable cost curve (curve A) is derived from the marginal cost curve, it will not shift.

The Figure Above Shows Some of a Firm's Cost Curves