Question 1 Assume a representative firm that produces goods y using capital & and labour n in each of two periods i = 1, 2. A denotes total factor productivity (TFP) which scales output. The production function takes the following functional form: yi = Akin, -. Assume the firm exists for two periods and enters period 1 with a pre-existing capital stock k1 . (1) Write down the intertemporal profit function and work out the first-order conditions for n1, n2 and k2. (2) From the first oder conditions for labour and capital, derive the demand schedules for labour and capital. (3) What happens to the labour and capital demand schedules when TFP, A, increases. (4) What interest rate did you use to discount future profits and why? What assump- tions did you make about the ownership of the firm