For b), the earlier analysis is just the the FORMULA AT THE BEGINNING, PLEASE SOP COMMENTING ABOUT IT, PLEASE GIVE A TRY, THANKS A LOT

Q4. The optimal capital stock. A leasing rm is in the business of borrowing money to buy capital and then renting that capital out to other rms {car rental agencies like Hertz and Enterprise operate on this principle]. Like all firms, profits [11'] are given by it = revenue costs. And like any good prot-maximising rm, they choose the optimal profit maximising quantity of capital by nding dn/dK and setting it equal to zero. Your textbook notes that the derivative {the effect of one extra unit of investment in year t on prots in year t + 1] is: mutt,+1 x m2,+1 + (1 we,\" (1 + tap, {a} Give some intuition for this expression, making sure to dene the terms as you go along. [[1] From our earlier analysis of price-setting behaviour, we know that MR,\" = PHI} (1+ pt). Given that, and assuming a production function of the form 1': K\"(EN)1"', use the equation above to find an expression for the optimal capital stock