Consider a firm solving the following problem: max. X{it}_E s.t. t B(1) -in Ptk it R t=0 it = kt (1 8)kt1 where pt is the price for firm's output which is i.i.d. over time and drawn from some distribution G (, 0). 1. Find the optimal choice of capital kt. 2. Consider an increase in variability of pt in terms of a mean preserving spread. What happens to the expected level of investment? Why?