7

Because "adjustment costs are linear and there is no aggregate uncertainty", the FOC for $N_t$ is $$f'\theta g_N(N_{t}, I_{t}) - w_N = \phi \lambda C_N$$. Notice that this is exactly the same form for each period. The same is for $I_t$. This means that a firm will choose the same labor inputs in all periods. In other words, the firm gets into the ...


2

Almost correct. Setting $W(h)=0$ is wrong (but inconsequential for the solutions). Checking the SOC for completeness should be included, but is somewhat obvious here. Correctness of 3. holds only under the assumption that the consumer owns no shares of the firm, which seems to hold in this exercise.


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