4. Many developing countries that have poor infrastructure are likely to leapfrog over countries with better...

 

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4. Many developing countries that have poor infrastructure are likely to leapfrog over countries with better infrastructure insofar as the installation of new infrastructure is concerned (e.g., the deployment of 5G networks in China). Assume that the knowledge of building the new infrastructure is available to both developing and developed countries. Let us try to write a little model of such a phenomenon. Suppose that you are the chief economic advisor of a developed country which has the 4G cellular network (transmission frequencies, towers, etc.) already installed. This infrastructure generates a social value of $x every year for the next T years. You are thinking of switching to the new 5G network infrastructure that will generate a social value of $y every year, also for the next T years. The cost of setting up this infrastructure is $C, which is smaller than the total social value generated by this new infrastructure. a. Write down an algebraic rule that tells you whether or not to scrap the current infrastructure and go for the new one. b. Suppose that x = 0.5y. Under what condition, will the developed country scrap the current infrastructure and go for the new one? c. Now consider a developing country that does not have the 4G network already installed. Thus, $x = 0. Using your answer to parts a. and b., explain why the newcomer can leap over the developed country with the newer 5G infrastructure. 4. Many developing countries that have poor infrastructure are likely to leapfrog over countries with better infrastructure insofar as the installation of new infrastructure is concerned (e.g., the deployment of 5G networks in China). Assume that the knowledge of building the new infrastructure is available to both developing and developed countries. Let us try to write a little model of such a phenomenon. Suppose that you are the chief economic advisor of a developed country which has the 4G cellular network (transmission frequencies, towers, etc.) already installed. This infrastructure generates a social value of $x every year for the next T years. You are thinking of switching to the new 5G network infrastructure that will generate a social value of $y every year, also for the next T years. The cost of setting up this infrastructure is $C, which is smaller than the total social value generated by this new infrastructure. a. Write down an algebraic rule that tells you whether or not to scrap the current infrastructure and go for the new one. b. Suppose that x = 0.5y. Under what condition, will the developed country scrap the current infrastructure and go for the new one? c. Now consider a developing country that does not have the 4G network already installed. Thus, $x = 0. Using your answer to parts a. and b., explain why the newcomer can leap over the developed country with the newer 5G infrastructure.

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Sol THANKYOU a A country will scrap the current infrastructure and will go to the new one only when ... View the full answer