Question: [Appendix Exercise] The following graph shows the firm's cost-minimizing input choice at current factor prices. The firm is currently employing 100 units of capital and

[Appendix Exercise] The following graph shows the firm's cost-minimizing input choice at current factor prices. The firm is currently employing 100 units of capital and 100 units of labor. The wage rate is $20, and the price per unit of capital is $10.

a. In the short run, the firm cannot change its level of capital. The price of labor rises to $25. If the firm wishes to continue to produce the current level of output, show the firm's short-run cost-minimizing input choice.
b. What will happen to the firm's short-run cost curves?
c. How will the firm's cost-minimizing input choice be different in the long run, when all factors of production are variable? Support your answer with a graph.

300 200 100 TC $3,000 100 200 300 IL 150

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