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Suppose that you are responsible for deciding a firm's investment in production technol ogy. The more money the firm invests, the better the technology. and
Suppose that you are responsible for deciding a firm's investment in production technol ogy. The more money the firm invests, the better the technology. and thus the lower the cost of production. The firm's total cost of production is flu-ll. where q is it's quantity of production and r its technology level. The firm's technology level as a function of investment in is rim.\" }, where the parameter (1 represents the ability of the engineers that you will hire to develop the technology. Your objective is to maximize the firm's profit .'tl_m.q_rr}l do, TlUJJJII] m by choice of investment in. Assume that the price and quantity are determined entirely by market demand, and thus are fixed parameters. As such. the revenue is omitted since it does not affect your incentives. The functions rand r satisfy the following properties: .4; n, w, u, r'\" o. r,\" I]. r,\" u, rm,\" n and r., u. 3 Provide an intuitive justification that money invested and engineering ability are substitutes (rm. it. ll)
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