The effects of a rise in mark-ups. In last week's tutorial sheet, you were presented with evidence that the global average mark-up has increased from about 1.1 in 1980 to 1.6 by 2016. Now that you have a formula for the optimal capital stock from the previous question, we can quantify the effect of the increase in mark-ups. Suppose the capital intensity of production () is 0.3, the depreciation rate is 6%, and the real interest rate is 2%. What happens to the desired capital stock as mark-ups rise from 10% to 60%? (To keep things simple, you may assume that the population and level of technology are constant.)