If the price of variable input increases, then:
A. The total cost curve will shift up.
B. The average total cost curve will shift up.
C. The marginal cost curve will shift up.
D. All of the above
To determine the correct answer, let's analyze the possible impacts of an increase in the price of a variable input on each curve individually:
A. The total cost curve represents the total cost of producing different levels of output. If the price of a variable input increases, the cost of production will rise, resulting in higher total costs. Therefore, option A is a possible outcome as the total cost curve will shift up due to increased costs.
B. The average total cost (ATC) curve represents the average cost of producing each unit of output. To calculate ATC, you divide the total cost by the quantity produced. If the price of a variable input increases, the total cost will increase, causing the ATC to rise as well. Thus, option B is also a possible outcome as the average total cost curve will shift up due to increased costs.
C. The marginal cost (MC) curve represents the change in total cost resulting from producing one additional unit of output. A general rule states that when the marginal cost curve intersects the average total cost curve, it does so at the minimum point of the average total cost curve. If the price of a variable input increases, the additional cost for each unit of output produced will also increase, resulting in a shift up in the marginal cost curve. Therefore, option C is also a possible outcome.
Since all three options are plausible outcomes of an increase in the price of a variable input, the correct answer is D. All of the above.