3. Consider a Cobb-Douglas production function Y=AKN1 with A=200,N=100,=0.25. Further, the nominal interest rate is 8%, the rate of inflation is 3%, the depreciation is 11%, output sells for $100 and the price of a unit of capital is $50,000 (a) What is the real price of capital? (b) What is the marginal cost of capital (MC)? (c) What is the optimal amount of capital that maximizes firm profits, K ? (d) Draw a graph of the MPK, MC, that includes the solution from 3c. (e) Include on the graph the impact of a decrease in the depreciation rate. In what direction does K change? Is the new MPK higher or lower? (f) Is the lower depreciation rate good or bad for the economy? Briefly discuss your answer. 3. Consider a Cobb-Douglas production function Y=AKN1 with A=200,N=100,=0.25. Further, the nominal interest rate is 8%, the rate of inflation is 3%, the depreciation is 11%, output sells for $100 and the price of a unit of capital is $50,000 (a) What is the real price of capital? (b) What is the marginal cost of capital (MC)? (c) What is the optimal amount of capital that maximizes firm profits, K ? (d) Draw a graph of the MPK, MC, that includes the solution from 3c. (e) Include on the graph the impact of a decrease in the depreciation rate. In what direction does K change? Is the new MPK higher or lower? (f) Is the lower depreciation rate good or bad for the economy? Briefly discuss your