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(Questions 11-15 relate to the following model) Consider the Competitive banking model of Freixas and Rochet Section 3.1. whe

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Banks profit function: TT (D.L) = ({-r)L+ (0(1-2) - r.) D- CCDL) maximize profut TT (D, L) (Equilibrium). max TT (0,0) = (-y= 52(rI-A-r) +Jy - 4(-) - 2(r(x) -1) L = () - ((-3) ro)] [ 2 (rl-)) - (-1) Given 222, 5들, 은급 ,스를 2 - (-) -ro) - ( 등 (1) -금) -Equilibrium level of profit 13. THIS) = 13 x 2 + 3 = x + 2) - C(OC) CCOL= 2(66) + (0)2 + ()2 *] C(QL) 2 66 (81)218 66 11 ( D. 2784 + (812 * 81 (812 168 +18 (812 (12 126-66 2 (1) 60 (872 6561 -0.009144 ~ 6.01 option c is correct r risen t15. loans! Equilibrium level of L* = 5 [2x23 - ] = s[-] LA 7 405 » option A ix correct

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