11. Suppose the Levee Blue Jeans® company uses excessive quantities of Cheap Blue Dye® in the production of its new, hip line of Irritatingly Stiff Jeans®. If the wholesale cost of Cheap Blue Dye® increases, which cost curves will shift upward for Irritatingly Stiff Jeans®.
As more pairs of Irritatingly Stiff Jeans® are produced, more Cheap Blue Dye® is needed, and vice-versa. Thus Cheap Blue Dye® is a variable cost and will only shift curves which include a variable cost component. These are AVC, ATC, and MC.
- Average fixed cost.
Since Cheap Blue Dye® is a variable cost it won't shift the AFC curve
- Marginal cost and average total cost.
Both these curves will shift but since this answer doesn't include AVC we keep looking to see if there is a choice that does. If no such answer is found we can come back to this one.
- Average total cost, average fixed cost, average variable cost and marginal cost.
Since Cheap Blue Dye® is a variable cost it won't shift the AFC curve which is included in this list.
- Average total cost, average variable cost and marginal cost.
This answer includes all the curves we've studied which have a variable cost component and none of the curves that don't, so this is the best choice.
- Average total cost and average variable cost.
Both these curves will shift but since this answer doesn't include MC and since the answer above does this can't be best.
