Firm B is currently producing 1,000 units of output per day. It employs 12 workers, paying each $200 per day, using 6 machines at a rental rate (r) of $300 per day. The marginal product of labor of the 12th worker is 40 units of output.

a. The firm can acquire a new machine at the same r that will increase production by 50 units of output. Should the firm replace a worker with this machine? Show or briefly explain.

b. If your answer is yes, how high would r have to be for the firm to not want the additional K? If your answer is no, how low would r have to be for the firm to want the additional K?