In the following graph,the price of capital is $100 per unit.How many units of capital should a firm use in order to produce 500 units of output at the least cost?
A)10 units of capital
B)12 units of capital
C)14 units of capital
D)20 units of capital
E)none of the above

Question

In the following graph,the price of capital is $100 per unit.How many units of capital should a firm use in order to produce 500 units of output at the least cost? 
A)10 units of capital 
B)12 units of capital 
C)14 units of capital 
D)20 units of capital 
E)none of the above

Quizplus · Accepted Answer

To produce 500 units of output at the least cost, we need to look at the point where the isoquant (curve representing all possible combinations of inputs for a given level of output) intersects with the isocost line (line representing all possible combinations of inputs that cost the same amount). This point will give us the least cost combination of inputs needed to produce 500 units of output. In this case, the isoquant intersects with the isocost line at around 12 units of capital. Therefore, the best choice is option B).

In the Following Graph,the Price of Capital Is $100 Per