A bottling company uses two inputs to produce bottles soft drink sludge: bottling machines (K) and workers(L). The machine costs $1000 per day (r) to run and the workers are paid $200 per day (w). At the current level of production, the marginal product of the machine is an additional 200 bottles per day (MP_K), and the marginal product of labor is 50 bottles per day (MP_L).

a. State the rule for determining the cos- efficient combinations of inputs (K & L) for the production of soft drinks.

b. Given r=$1000 per day, w=$200 per day, (MP_K)= 200 bottles, and (MPL)= 50 bottles, is the company operating cost efficiently?

c. What must the company do to move toward cost efficient operation? Hint: use more labor or more machines and why?