Q1 A firm's output (Y) depends on how much capital (K) it has, according to the following function: Y = 180K - K2. The real interest rate is 5% per year, the depreciation rate of capital is 5% per year and the price of a unit of capital is $600, and each unit of output sells for $2.

(A) Calculate the desired capital stock.

(B) When the firm currently has K=50, calculate the gross investment this firm would make for the coming season.