Question

The firm you manage faces the following costs: Quantity Total Cost 0 $4 1 $6 2 $7 3 $10 4 $15 5 $21 What is the average fixed cost of the 2nd unit produced

Answer 1

The average fixed cost of the 2nd unit produced is:

= $2.

Step-by-step explanation:

a) Data and Calculations:

Quantity Total Cost Fixed Cost Average Fixed Cost

0 $4 $4 $4

1 $6 $4 $4

2 $7 $4 $2

3 $10 $4 $1.3

4 $15 $4 $1

5 $21 $4 $0.8

b) The average fixed cost (AFC) is the total fixed cost divided by the quantity of production within the relevant range. It does not change when there a change in the number of goods and services produced by a company. Average fixed cost can be calculated from the salaries of permanent employees, the mortgage payment on machinery and plant, and rent.