Principles of Microeconomics / Unit 7 MIC 0629 short lesson, about 20 seconds
A Fixed-Cost Change
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The idea
A new fixed cost, such as a license fee, raises average total cost and leaves marginal cost alone. Short run, nothing changes; long run, losses cause exit until the price covers the fee.
In practice
The fee reaches the price only after firms leave.
Where people slip
Short-run price and output depend on marginal cost alone; fixed costs reach the price through exit, never through supply.
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