$2\mathrm{.}1$ What $is$ the profit function $in$ this case? What $is$ the dividend $in$ this case?

$[10\%]$

$2\mathrm{.}2$ Define the value function and the Bellman equation under the assumptions

stated $in$ Question $2$ above.

$[15\%]$

$2\mathrm{.}3By$ how much will the value $of$ the firm change $if$ more capital $K2$ were

made available?

$[10\%]$

$2\mathrm{.}4$ Suppose a new technology made the old technology embodied $inK2$

obsolete. $In$ this case firms that operate with the old technology embodied

$inK2$ have $to$ pay a marketing cost, $tY,$ where $t=1.$ Would you $be$ willing $to$

buy shares $in$ this company? Why $or$ why not?

$[15\%]$

Question $2$

Now suppose the firm's production has changed $toY=A{K}_1^{}{K}_2^{},$ where and

are parameters. Employees have been made redundant and the firm has

replaced them with a new technology embodied $in{K}_2.$ However, $in$ order $to$ make $a$

sale the firm pays a marketing cost that $is$ equal $tocY,$ where other words,

marketing implies a resource cost $in$ terms $of$ production. Everything else remains

identical $asin$ Question $1$ above.

$2\mathrm{.}1$ What $is$ the profit function $in$ this case? What $is$ the dividend $in$ this case?

$2\mathrm{.}2$ Define the value function and the Bellman equation under the assumptions

stated $in$ Question $2$ above.

$2\mathrm{.}3By$ how much will the value $of$ the firm change $if$ more capital $K_2$ were

made available?

$2\mathrm{.}4$ Suppose a new technology made the old technology embodied $in{K}_2$

obsolete. $In$ this case firms that operate with the old technology embodied

$in{K}_2$ have $to$ pay a marketing cost, $tY,$ where $t=1.$ Would you $be$ willing $to$

buy shares $in$ this company? Why $or$ why not?