Question: Gamma Corporation, one of the firms that retains you as a financial analyst, is considering buying out Beta Corporation, a small manufacturing firm that is now barely operating at a profit. You recommend the buyout because you believe that new management could substantially reduce production costs, and thereby increase profit to a quite attractive level. You collect the following product information in order to convince the CEO at Gamma corporation that Beta is indeed operating inefficiently:

MPL = 10, \({{p}_{L}}\) = $20

MPK = 15, \({{p}_{K}}\) = $15

Explain how these data provide evidence of inefficiency. How could the new manager of Beta Corporation improve efficiency?