Your cousin vinnie owns a painting company with fixed costs...

Name: your cousin vinnie owns a painting company with fixed costs of 200 and the following schedule for variable costs mathrmquantity of houses painted per month quad 1quad 2quad 3quad 4quad 5quad 6quad 7 2
Uploaded: 2021-08-17T02:31:00-08:00
Duration: 4 min 12 s
Channel: Karan Sood
Description: your cousin vinnie owns a painting company with fixed costs of 200 and the following schedule for variable costs mathrmquantity of houses painted per month quad 1quad 2quad 3quad 4quad 5quad 6quad 7 2

Your cousin Vinnie owns a painting company with fixed costs of $\$$200 and the following schedule for variable costs: $$\mathrm{Quantity \, of \,Houses \, Painted \, per \, Month} \quad 1\quad 2\quad 3\quad 4\quad 5\quad 6\quad 7$$ $$\mathrm{Variable\, Costs} \quad$10 \quad$20 \quad$40 \quad$80 \quad$160 \quad$320 \quad$640$$ Calculate average fixed cost, average variable cost, and average total cost for each quantity. What is the efficient scale of the painting company?

Transcript

00:01 So now in this question we are going to calculate the different costs that is the total cost average fixed cost and average variable cost and average total cost and we will also have to find the efficient scale of output of all the available output now first of all we should know that what exactly efficient scale of output is now efficient scale of output occurs at that point where the average total cost is the minimum now if we look at this table so we have calculated average total cost at different units of output so like for one the average total cost is 210 for second unit of output the average total cost is 110 dollars similarly for three units of output the average total cost is 80 and for four units of output the average total cost is 70 dollars similarly we have calculated for other units of output now out of this we can see the minimum average total cost is at four units of output it is at 70 so we can say our efficient scale of output is 4 units because at this scale our average total cost is the minimum at $70.

01:06 So efficient scale of output is 4 units.

01:08 Now let us come to that how we have calculated these costs.

01:12 Let us take the example of 4 units of output.

01:15 Now first of all, fixed cost will remain fixed at all units of output.

01:20 That is whether at 1 unit, 2 unit 3 unit 4 unit 5 unit, the fixed cost will remain same at $200 at all units of output and variable cost is given to us.

01:30 Now how we calculate total cost.

01:32 Now total cost is the sum total of fixed cost plus variable cost.

01:36 Like we can see at one unit's output, the total cost will be 200 plus 10, 210.

01:41 Similarly, at two unit of output it is 200 plus 20, 220.

01:46 And we have calculated the same for four units also.

01:49 Like for four units, we know that fixed cost is 200, variable cost is 80...