In Econ 102 and 103 we an

In Econ 102 and 103 we an

In Econ 102 and 103 we analysed the concept of opportunity costs. This problem is a simpleextension of that concept. Suppose that you are an economic advisor to a developing country.The country faces major hurdles in its prospects for economic development. On the one handthe current level of infrastructure and technology will generate a total social value of ~a everyyear for the next T years. To modernize and develop itself however the government couldinvest in a superior technology that will generate ~b every year for the next T years. There ishowever, a one time xed-cost of adopting this new growth path. Call this cost C . Comeup with a mathematical rule that would indicate whether to invest in the new technology ornot. If you like, you could assume an annual discount rate of .Based on the above answer explain why less developed countries would have an incentive toinvest in new infrastructure and technology?

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