Tina asked in Social ScienceEconomics · 8 years ago

How will a decrease in interest rates affect a firm's cost curves (ATC, AVC, AFC, and MC)?

Also as a completely different question, how will a rise in shipping costs affect a firm's cost curves (ATC, AVC, AFC, and MC)

sorry for asking two questions in one but yahoo answers wont let me ask another question

1 Answer

  • 8 years ago
    Favorite Answer

    Shipping costs are only variable costs so , if those go up...ATC, AVC and MC will go up.

    Interest rates are composite of fixed capital and running capital. Assuming the fixed capital expenditure occurred only once , then that rate remains fixed and so nothiing changes. But for higher initial rates the ATC and AFC will be higher. But , if in addition to that running cost is made up with loans then AVC and MC too will go up with rise in interest rates.

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