17. Consider a manufacturing firm which uses natural gas to generate its own electricity. The electricity is used to run its manufacturing equipment. If the price of natural gas rises this would lead to:
Since the natural gas is used to generate electricity which is used to manufacture whatever it is this firm makes, it will use more natural gas whenever it increases output and use less when it decreases. Thus, natural gas is a variable cost for this firm. If its price increases it will shift all the curves which have a variable cost component. These are: Marginal Cost, Average Variable Cost, and Average Total Cost.
- a shift up in the marginal cost, average variable cost, and average fixed cost curves.
This is wrong because average fixed cost doesn't shift when a variable cost changes.
- a shift up in the average fixed cost and average total cost curves.
This is wrong because average fixed cost doesn't shift when a variable cost changes.
- a shift up in the marginal cost, average total cost, and average fixed cost curves.
This is wrong because average fixed cost doesn't shift when a variable cost changes.
- a shift up in the marginal cost, average variable cost, and average total cost curves.
- a shift up only in the average total cost curve.
This is wrong because it ignores the shift in marginal cost and average variable cost.
