Instructed to choose the combination of inputs that minimizes the cost of producing 2,000 pan-head screws,your assistant returns with the startling news that the Lagrangian multiplier is $0.10.From this you conclude that:
A) costs have not been minimized.
B) the average cost of producing screws at 2,000 units is $0.10.
C) the marginal cost of producing screws at 2,000 units is $0.10.
D) marginal cost equals average cost.
E) the price of the screws must be $0.10.

Question

Quizplus · Accepted Answer

The Lagrangian multiplier represents the marginal cost of production. Therefore, the correct choice is C, which states that the marginal cost of producing screws at 2,000 units is $0.10. The other answer choices are incorrect because they do not accurately interpret the meaning of the Lagrangian multiplier.

Instructed to Choose the Combination of Inputs That Minimizes the Cost