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

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

= $2.

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.

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