7.31. Acme, Inc., has just completed a study of its production process for gadgets. It uses labor and capital to produce gadgets. It has determined that 1 more unit of labor would increase output by 200 gadgets.

However, an additional unit of capital would increase output by 150 gadgets. If the current price of capital is

$10 and the current price of labor is $25, is the firm employing the optimal input bundle for its current output?

Why or why not? If not, which input’s usage should be increased?