You are an efficiency expert hired by a firm in the clothing industry that uses machines (K) and workers (L) as inputs. The firm has estimated that the marginal product of labor is MPL = 120 - 6 L, while the marginal product of capital is MPK = 50 - 5 K. The firm is currently using 16 units of L and 7 units of K. If w = $20, r = $15 then..

1. The firm is profit maximizing but not cost minimizing

2. The firm is minimizing the cost of producing the given quantity of output.

3. The firm must use less K and more L to minimize the cost of producing the given quantity of output  

4. The firm must use less L and more K to minimize the cost of producing the given quantity of output.