Suppose a firm is initially producing 250 units of output at point C, where the purple line labeled Total Cost 1 lies tangent to the blue line labeledq=250q=250. Initially, the wage (ww) is $10 and the rental rate of capital (rr) is $20.

See graph below.

10 T g=250 9 B Total Cost 2 CAPITAL (Machines per week) 6 X 4 5 Total Cost 1 3 NJ 2 3 5 7 8 10 LABOR (Workers per week) H Display Settings WStyles 5 Initial Capital Rental New Capital Rental Rate Rate Total cost of producing using bundle C: Total cost of producing using new bundle: Lo Duplay Settings 9