Consider a firm that initially had an optimal level of capital. For each of the following events, describe (i) how that event will affect the replacement cost of capital and the market value of capital, (ii) how that will affect the Tobins q, and (iii) how that will affect the firms investment.

1) (5 points) An improvement in the production technology of the firm.

2) (5 points) A decrease in the number of employees hired.

3) (5 points) Destruction of some of the existing capital due to an earthquake.

4) (5 points) The price of capital goods increases