Refer to the following figure.The price of capital is $50 per unit: The minimum cost of producing 800 units of output is
A)$ 6,000.
B)$ 7,500.
C)$ 8,000.
D)$10,000.

Question

Refer to the following figure.The price of capital is $50 per unit:  The minimum cost of producing 800 units of output is
A)$ 6,000. 
B)$ 7,500. 
C)$ 8,000. 
D)$10,000.

Quizplus · Accepted Answer

The total cost of producing a certain output level can be calculated as the sum of the cost of all inputs required to produce that output. In this case, the only input required is capital, which is priced at $50 per unit.

To produce 800 units of output, we need to use 8 units of capital (800/100 = 8). Therefore, the total cost of producing 800 units of output is:

Total cost = 8 x $50 = $400

However, we also need to take into account the fixed cost of production, which is $7,100 (as shown in the figure). Therefore, the minimum cost of producing 800 units of output is:

Minimum cost = Total cost + Fixed cost = $400 + $7,100 = $7,500

So, the best choice is B, which is the minimum cost of producing 800 units of output.

Refer to the Following Figure