The substitution of captial for labor reduces costs as long as the ratio of marginal products is greater than the factor cost ratio. By reducing the amount of capital it uses and increasing the amount of labor being used the firm moves to production method G where the Marginal Rate of Techincal Substitution equals the factor cost ratio. Remember that reducing the amount of capital used raises its marginal product and increasing the amount of labor used decreases its marginal product. Whever the ratio of factor costs changes firms will attempt to adjust the captial labor mix to come as close as possible to the optimal mix for current prices where: