Question

In: Economics

What effect does the increase of the price of gasoline have on the cost curves of...

What effect does the increase of the price of gasoline have on the cost curves of package delivery firms such as Federal Express or United Parcel Service? Which cost curves will this price change impact and in what direction will they shift? For an extra point draw the original curves and indicate the shift.

Solutions

Expert Solution

The rise in the price of gasoline implies that the cost of carrying the material from one place to another has increased for the firms such as the Federal Express or united parcel service.

Such a rise in the price of the oil would affect the average cost of production.

The average cost of production will shift upward.

following is the diagram:

in the above diagram, the AC has shifted upward. and now it is AC1

Rahul Sunny answered 2 years ago
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