1. *3.2 A company uses capital, K, and labor, L, to produce its output. The isoquants have the usual smooth shape. The rental rate of a unit of capital is £1,000 per day to run, and the wage rate is £200 per day.

If the marginal product of capital is 200 bottles per day, and the marginal product of labor is 50 bottles per day, is the firm producing at minimum cost?

Should the firm change the ratio of inputs it uses to lower its cost of production? If so, how? M