Suppose that the marginal product of labor (MPL) is 200 while the wage (w) is 20.Suppose also that the marginal product of capital (MPK) is 400 while the price of capital (r) is 40.

a)Is the firm currently maximizing long-run profits?

b)Suppose that the price of capital (r) increases to $50.How should the firm remix inputs to increase profits holding output constant?

c)Given the change in the price of capital, how should the firm change the level of output? How would this change in output affect the amounts of capital and labor used by the firm?

d)In total (considering both parts b) and c)), what would we expect to happen to the amount of capital used by the firm?What about the amount of labor used?