Suppose firms in monopolistic competition face an increase
in fixed costs. Auto repair shops are a monopolistically competitive
industry in most populous areas.
Suppose property taxes rose significantly in the area we are
considering, this would be an increase in fixed costs for the
firms. We show this as a shift up in the average total cost curve
curve to ATC2 as shown to the right. Since variable costs don't change the
marginal cost curve doesn't shift.
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