Suppose that we modify the model of the firm's investment behavior by supposing that any capital that remains at the end of the period can be sold at the price of pk- a) (10pts) Determine how this change affects the optimal investment rule for the firm

Economics Dec 12, 2020

Suppose that we modify the model of the firm's investment behavior by supposing that any capital that remains at the end of the period can be sold at the price of pk- a) (10pts) Determine how this change affects the optimal investment rule for the firm. b) (5pts) What are the effects of an increase in pk on the firm's optimal investment schedule?

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