Q1) Consider the model of investment under asymmetric information in Section 10.2 of the reading. Suppose that initially the entrepreneur is undertaking the project, and that (1 + r)(1- W) is strictly less than RMAX. Describe how each of the following affects D:

(a) A small increase in W .

(b) A small increase in r.

(c) A small increase in c.

(d) Instead of being distributed uniformly on [0, 2], the output of the project is distributed uniformly on [ - b, + b], and there is a small increase in b. (e) Instead of being distributed uniformly on [0, 2], the output of the project is distributed uniformly on [b, 2 + b], and there is a small increase in b.