Suppose a firm’s lease agreement (rental contract) on its facility has expired and it is free to move to a new location or to stay in its current location (i.e., it can change both its level of capital and labor). The firm expects to have a monthly budget of $2000, and the price of labor is expected to be Pl = $8 per unit and the price of capital is expected to be Pk = $20 per unit. Given this information, the firm’s monthly budget constraint is:
A) L = 250 - 0.4K
B) L = 250 - 2.5K
C) K = 100 - 0.2L
D) K = 100 - 2.5L
E) Both B and C