Now assume that you are considering expanding your company by buying more capita

Question

Now assume that you are considering expanding your company by buying more capital goods (buildings, machines, and tools). If your company were larger (meaning that it had more capital goods), total fixed cost would increase from $180,000 to $210,000. However labor costs would decrease because the capital goods that you purchased would reduce your need for workers. Therefore, your total variable cost would decrease by $5,000 per home, as shown in the table. Quantity Total Variable Cost Total Fixed Cost Total Cost $155,000 290,000 405,000 540,000 695,000 870,000 1,065,000 1,280,000 1,515,000 1,770,000 $210,000 $210,000 210,000 365,000 210,000 500,000 615,000 750,000 210,000 905,000 210,000 1,080,000 210,000 1,275,000 210,000 1,490,000 210,000 1,725,000 210,000 1,980,000 210,000 210,000 10 6.1. Calculate the new average fixed cost if you build seven houses. Please enter a whole number, with no decimal point

Explanation / Answer

Answer
Average fixed cost=total fixed cost/number of output
=210000/7
=30000
The average fixed cost is $30000

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