[Appendix Exercise] The following graph shows the firm's cost-minimizing input choice at current factor prices.

a. What are the current prices of capital and labor, based on the graph?
b. Suppose that the price of labor increases. If the firm wishes to continue to produce the current level of output, how will the firm's optimal input choice change (relative to its current choice)? Support your answer with a graph.

Transcribed Image Text:

100 50 Q= 1,000 50 100 L