AB is the original (starting) isocost line. BC is the new (changed) isocost line. Q₀ is the isoquant. D is the original tangency point (cost minimization point for output Q₀).

(a) Is price of capital rising or falling when the isocost line moves from AB to BC? Please

explain.

(b) Show the new tangency point between the new isocost line and an isoquant that would

indicate the new equilibrium point for this firm.

(c) As a result of the price change of capital, does output fall or rise? Please explain.