2) (9 pts) Demand for investment, user cost of capital and market value of capital Joe is a corn farmer who currently owns K acres of land. Joe is considering a purchase of 2?; additional acres of land at the current market price of P per acre. Next period, Joe will be able to grow and sell 20(K + @129 dollars worth of corn. Next period's price of land is P' per acre. Accordingly, Joe's present value of economic prot is 1 Pk+ (20-(K+k)2+P'-(K+k)) 1+?\" a) Express the user cost of one dollar's worth of land through P, P' and 7'. Explain how your answer is consistent with the Jorgenson's formula. (Hint: assume that land does not experience wear and tear depreciation, that is, d : 0) b) Let P = 1000 dollars per acre, P' = 1020 dollars per acre and r = 0.05. If Joe were to lease the land instead of buying, what is the current amiual rental amount per acre that covers the land's user cost? c) Set K = 0.01. Continue to assume that P = 1000 dollars per acre, P' = 1020 dollars per acre, but now treat 1" as a variable. Use J oe's prot maximization condition to derive the expression for the investment decision rule, Mr). Plot the investment decision rule for r 6 [003,01] (Hint: Use the prot maximization MB : M 0 condition to relate k and 1'. Then solve this equation for k to get the investment decision rule Mr