Suppose that the government charges a firm a franchise tax each year​ (instead of only​ once). Describe the effect of this tax on the marginal​ cost, average variable​ cost, short-run average​ cost, and​ long-run average cost curves. ​ (Assume that the​ firm's before-tax average cost​ curve, ​, is​ U-shaped.)The annual franchise tax not affectthe​ firm's marginal cost​ curve, not affect increases the​ firm's average variable cost​ curve, does not ​ short-run average cost​ curve, and not affect decreases the​ long-run average cost curve.

does not affect; does not affect; increases; increases

Explanation:

''The annual franchise tax does not affect the​ firm's marginal cost​ curve, does not affect the ​firm's average variable cost​ curve, increases the​ short-run average cost​ curve, and increases the​ long-run average cost curve.''

Franchise taxes do not affect output so will not be apportioned to output. This means that neither the marginal cost nor the variable cost will change because the tax does not change with output.

The fixed costs will however increase because the tax is a fixed cost. As fixed cost is a part of total cost, the average cost curve will increase to show this change. The tax is paid each year instead of once so in the long run the firm would still be paying the tax so the long run average cost curve is affected as well.

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