TASK 1 Glen Eira City Council wants to impose a tax to fish and chips shops. It is considering two types of tax: a lump sum of 500$ on each fish and chips owner a tax of 2$ per kg of fish and chips sold, paid by each fish and chips owner (a) Which cost curve would shift as a consequence of each type of tax? (AFC, AVC, ATC, MC)? (b) Consider the following table of long-run total cost for three different fish and chips shops. Does each shop experience economies/ diseconomies of scale? Quantity Happy squid Juicy Prawns Magic swordfish 1 20 11 21 2 30 24 34 40 39 49 4 50 56 66 5 60 75 85 6 70 96 106 7 80 119 129 TASK 2 You are given the short-run total cost function of a computer manufacturing firm TC = 10 + 5Q - Q2 + 0.2Q3 where, TC is total cost in $, and Q is quantity of computers produced per week a) What are the TFC and TVC functions? b) Derive expressions for the AFC, AVC, ATC and MC functions. Then, roughly show these cost functions on a diagram c) Find the Q and AVC where MC = minimum AVC d) Explain why the MC cuts the AVC and ATC at their minimum