Refer to the following graph.The price of capital (r)is $20. What is the lowest possible cost at which 14,000 units of output can be produced?
A)$8,600
B)$2,400
C)$3,600
D)$4,200
E)none of the above

Question

Refer to the following graph.The price of capital (r)is $20.  What is the lowest possible cost at which 14,000 units of output can be produced?
A)$8,600 
B)$2,400 
C)$3,600 
D)$4,200 
E)none of the above

Quizplus · Accepted Answer

To find the lowest possible cost at which 14,000 units of output can be produced, we need to find the point where the isocost line (the line representing a specific cost of production) is tangent to the isoquant curve (the curve representing all possible combinations of inputs to produce a given level of output) for 14,000 units of output. The point of tangency will be the optimal combination of inputs that minimizes cost for producing 14,000 units of output.

In the graph, the isoquant curve for 14,000 units of output is labeled Q14,000, and the isocost line representing a cost of $3,600 is labeled C=$3,600. The point of tangency between the two curves is labeled E, and it represents the optimal combination of inputs that minimizes cost for producing 14,000 units of output at a cost of $3,600.

Therefore, the lowest possible cost at which 14,000 units of output can be produced is $3,600, and the best choice is C.

Refer to the Following Graph