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4. (70 marks) Consider an economy which is identical to the 2-period production econ- omy that we studied, except that the capital stock is fixed

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4. (70 marks) Consider an economy which is identical to the 2-period production econ- omy that we studied, except that the capital stock is fixed at K in both periods, so that there is no investment in physical capital K, and the firm's production function in the present and future is Y = 2F(K, N) and Y' = z'F(K, N'). Also assume that firm does not liquidate its capital stock at the end of period 2 as in the regular 2- period production model. The firm does, however, operate a storage technology, such that I units of goods stored in the current period yields I(1+g(I)) goods in period 2, where g(1) > 0 and g'() 0 and g'()

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