Have you wondered, why the International Space Station is 400 kilometers above the Earth's surface?

To answer these question let's start by limiting possibilities:

Cost Of Building International Space Station 

The International Space Station costed us an estimated a hundred billion dollars to build. Therefore, everything about it is engineered with precision because anything that is designed differently that in the long term cost us hundreds of millions of dollars more. 

Purpose Of International Space Station 

According to the memorandum between NASA and the Russian space agency article 2, section 2.3, "the purpose of the International Space Station is to enable its users to take advantage of human ingenuity in connection with its low gravity environment, the near-perfect vacuum of space and the vantage point for observing the earth and the rest of the universe."

Specifically the International Space Station is aspired to be a space laboratory Observatory, a transportation node and possibly a staging base for future missions, mong many other capabilities it needs to provide.

In other words whatever the orbit might be for the International Space Station, it needs to provide a comfortable living space for astronauts and scientists , and it needs to perform the aforementioned functions. Therefore among many other things the astronauts need to be safe. This hands eliminate the possibility of having an International Space Station above 700 kilometers altitude because the radiation level there is too high for human astronauts.

Van Allen Radiation Belts

Surrounding our earth is the Van Allen radiation belts that extend from 700 kilometers altitude to 60,000 kilometers altitude. Within the belt it's filled with particles which are dangerous for astronauts. But, because of that anything under 700 kilometers altitude is shielded from our sun's radiation which make it a safe environment for astronauts to reside.

Also anything orbiting the earth below 300 kilometers altitudes will be subjected to significant atmospheric drag meaning the air will be dragging the enormous International Space Station down at an altitude of 400 kilometers. Our International Space Station is already dropping to the earth at the speed of around 2 kilometers per year and reboosts are performed every year to bring it up. Therefore, we can't afford to have an International Space Station below 300 kilometers altitude. Either, this effectively limits its orbit height to anything between 300 kilometers to 700 kilometers, this still doesn't give us a reason why 400 kilometers was chosen to be the final orbit of the International Space Station.

Cost Of Launching Rocket

The last piece of the puzzle is cost when the International Space Station was initiated in 1998, cost of launching rocket is extremely high and to reach a higher orbit of 700 kilometers altitude means tens of millions of additional funding required per flight. Counting in the number of flights every year it is a lot of money. So in conclusion, the choice of 400 kilometers altitude for the International Space Station is really made. Based on the technical constraints we have and the economic sustainability we're after. If we can accomplish all objectives at 400 kilometers altitude at a much lower cost we just shouldn't build the International Space Station as 700 kilometers altitude.