Apple is deciding whether or not to invest $10,000 in research and development to develop the iGlasses. If they make this investment today, they will be able to develop the iGlasses for sure and start selling them starting from next year. They will also obtain a 10 year patent on the product. Once the patent expires, copycats will leap into the market and make it perfectly competitive. Other than the research and development investment, the cost of producing iGlasses is approximately 0. Suppose that market demand for the iGlasses isp=2005q

in each year. The interest rate is 10% and there is no inflation.

1. Apple will develop the iGlasses or not? Or is it ambiguous?

Suppose that the U.S. government decreases the number of years for which a patent is valid to 5.

1. Apple will develop the iGlasses or not? Or is it ambiguous?