Question

Your cousin Vinnie owns a painting company with fixed costs of $200 and the following schedule for variable costs: Quantity Variable Cost Average Fixed Cost Average Variable Cost Average Total Cost (Houses Painted per Month) (Dollars) (Dollars) (Dollars) (Dollars) 1 10 2 20 3 40 4 80 5 160 6 320 7 640 The efficient scale is ___________houses.

Answer 1

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.

Answer 2

The minimum efficient scale (MES) is the lowest point in the cost curve where a company can produce its product at a competitive price.

What is a minimum efficient scale?

In an industrial organization, the minimum efficient scale (MES) or the effective scale of production is the lowest area where an industry (or firm) can produce in such a way that its long-run average costs are reduced.

On the MES point, a company can achieve the economy of the amount needed to be able to compete effectively in its industry.

As per the given information, we have to calculate:

$\rm\,Average \;fixed \;cost = \dfrac{Fixed \;Cost}{Quantity}\\\\Average \;Variable Cost= \dfrac{Variable \;Cost }{Quantity}\\\\Average \;Total \;cost =Average fixed cost+ Average Variable Cost\\\\Average fixed cost = \dfrac{200}{1},\dfrac{200}{2}.\dfrac{200}{3} ,\dfrac{200}{4}, \dfrac{200}{5}, \dfrac{200}{6}, \dfrac{200}{7}$

Similarly, $\rm\,Average Variable Cost= \dfrac{10}{1}, \dfrac{20}{2}, \dfrac{40}{3}, \dfrac{80}{4}, \dfrac{160}{5}, \dfrac{320}{6}, \dfrac{640}{7}$

AC or total Average cost is attached in the image below.

The efficient scale of production at four Houses is the lowest point where Vinnie paint company can produce such that its Total average costs are minimized.

Therefore, the efficient scale is 4 houses as the average cost is the minimum at this point.

To learn more about minimum efficient scale, refer:

https://brainly.com/question/13843450