Again for the model of Question 3, suppose that the Home government provides a $1 per transistor export subsidy to the H firm.
(a) Show how this changes the equilibrium, computing the new equilibrium prices and quantities and showing the new equilibrium in the reaction- function diagram for the foreign market.
(b) Show the welfare effects of the export subsidy in a diagram that shows the H firm's profit and the Home taxpayer's burden. Does Home benefit from the subsidy?
(c) Does Foreign benefit from Home's export subsidy? Explain.