Answer: The efficient scale is _4__________houses.
Explanation:
given fixed costs as $200
and variable costs as 1 10 2 20 3 40 4 80 5 160 6 320 7 640
Using
Average fixed cost =Fixed Cost/Q
uantity
Average Variable Cost=Variable Cost /Quantity
Average Total cost Cost =Average fixed cost+ Average Variable Cost
Average fixed cost = 200/1, 200/2, 200/3, 200/4, 200/5, 200/6., 200/7
Average Variable Cost= 10/1, 20/2, 40/2, 80/2, 160/2, 320/2, 640/2
Average Total cost Cost= 200+10. 100+10, 66.67 + 13.33,50+20, 40+32, 33.33 + 53.33, 28.57 + 91.43
Qty Variable Average Average Average
(Houses Cost Fixed Cost Variable Cost Total
Painted FC/Q VC/Q AFC + AVC
per Month (Dollars) (Dollars) (Dollars) (Dollars)
1 10 200 10 210
2 20 100 10 110
3 40 66.67 13.33 80
4 80 50 20 70
5 160 40 32 72
6 320 33.33 53.33 86.67
7 640 28.57 91.43 120
Efficient scale, in which Total Average cost is at it lowest is a is the mark at which a company can achieve the best economies of scale required to effectively run its industry at an advantage. The efficient scale of production here is the lowest point where Vinnie paint company can produce such that its Total average costs are minimized
Looking above at the completed table, you will notice that the Average total cost at the least and minimum value is at $70. this shows that the efficient scale is 4 houses.
