Question: please don't copy answer from other website thanks ! 4. Intertemporal choice ( Consider a linear production possibility curve with slope dD, 5 - for
please don't copy answer from other website thanks !

4. Intertemporal choice ( Consider a linear production possibility curve with slope dD, 5 - for all Do dDo 4 (a) What can we infer about the shape of the production function and the marginal value product of capital? (b) Suppose the interest rate r is positive but otherwise unknown. Derive three general possibilities for the equilibrium of the firm's investment decision, dependent on intervals (values) of the interest rate (interior solution and corner solutions). What are the cash flows in both periods (Do,,), compared to the respective cash flows before the investment decision takes place (Do, ). Hint: A sketch of the situation might help. (c) Sketch examples of the three possibilities. What can we infer about the utility of the firm's owner? The expenditures in both periods of time are normal goods
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
