1. (40 points) Suppose economic output Y depends only on capital K according to the equation Y = 25K-K2. The marginal product of capital is W - 2K. The real interest rate is 6% per year, the depreciation rate of capital is 14% per year and the price of a unit of capital is $80, and each unit of output sells for $1. a. For capital levels from 0 to 6, how much is output? b.-For capital levels from 1 to 6, calculate the marginal product of capital. Is there a diminishing retum to capital? c. How many units of capital does the rm desire? d. If the real interest rate was 1% per year, how many units of capital would the rm desire? e. Explain the difference in the results in (c) and (d)