A Pareto-efficient allocation of capital and labor inputs occurs at a tangency between Cereal, Inc.’s and Pancake, Inc.’s isoquants, where Cereal, Inc.’s marginal rate of technical substitution (MRTS_LK) equals Pancake, Inc.’s MRTS_LK. Point F shows a possible allocation of labor and capital between Cereal, Inc. and Pancake, Inc. Because it lies on the intersection of isoquants Q_C1 and Q_P1—and not at the tangency—F is an inefficient allocation. G, which is located at the tangency between Q_C2 and Q_P2, is a Pareto-efficient input allocation.