GM’s Latest Tariff Hit: $ 1.1 Billion

Well Done! - Tariffs increase GM’s total variable cost. Average variable cost—total variable cost per vehicle—increases. Average fixed cost—total fixed cost per vehicle—does not change. Average total cost—the sum of average variable cost and average fixed cost— increases.

Marginal cost—the increase in total cost that results from producing an additional vehicle—increases

That's Right! - In the long run, GM can change the size of its plant. With the tariff on imported vehicles and imported vehicle parts, a long-run decision may be to close some foreign plants and expand production in some U.S. plants to lower costs.

Good Job! - GM will make the costly decision to change its plant size when it knows whether tariffs are permanent or temporary.