Refer to the following:
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:
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 of production (C), we need to use the formula: 
C = r*K + (w*L)
Where r is the price of capital, K is the quantity of capital, w is the wage rate, and L is the quantity of labor.
We are given the value of r as $20.
We need to find the combination of K and L that will give us the lowest possible cost of production for 14,000 units of output.
To find this combination, we need to use the isoquant for 14,000 units of output.
The isoquant is the curve that shows all the combinations of K and L that can produce 14,000 units of output.
From the graph, we can see that the isoquant for 14,000 units of output is intersecting the isocost line at point B.
Therefore, the combination of K and L that will give us the lowest possible cost of production for 14,000 units of output is at point B.
From the graph, we can see that at point B, 14 units of capital and 600 units of labor are used.
Substituting these values into the formula, we get:
C = (20 x 14) + (10 x 600) = $3600
Therefore, the lowest possible cost at which 14,000 units of output can be produced is $3600.

Refer to the Following