Refer to the following figure.The price of capital is $50 per unit: What is the minimum cost of producing 400 units of output?
A)$3,000
B)$4,000
C)$5,000
D)$6,000
E)none of the above

Question

Refer to the following figure.The price of capital is $50 per unit:  What is the minimum cost of producing 400 units of output?
A)$3,000 
B)$4,000 
C)$5,000 
D)$6,000 
E)none of the above

Quizplus · Accepted Answer

To produce 400 units of output, we need to find the point on the isoquant where output is equal to 400. This point lies on the 4th isoquant (counting from the left), where 4 units of capital and 8 units of labor are used. The cost of producing 400 units of output is (4 x $50) + (8 x $25) = $200 + $200 = $400. Since the firm is producing on the lowest possible isoquant given its output level, this is the minimum cost of production. Therefore, the answer is (C) $5,000.

Refer to the Following Figure