1.(10 marks) In the Melitz model of heterogeneous firms, answer the following questions:

a)(5 marks) Show how assuming that means that firms that export would always enter the domestic market too.

a)(5 marks) Explain how an increase to the exogenous probability of firm "death", , affects: the firm cutoff productivity (), the mass of firms/varieties M in the domestic market, and briefly describe how it affects a firm's decision to export or not (conditional on the firm being above the cutoff productivity and entering the domestic market in either scenario).

(10 marks) In the Melitz model of heterogeneous firms, answer the following questions: a) (5 marks) Show how assuming that -fx > f means that firms that export would always enter the domestic market too. a) (5 marks) Explain how an increase to the exogenous probability of firm "death", S, affects: the firm cutoff productivity (*), the mass of firms/varieties M in the domestic market, and briefly describe how it affects a firm's decision to export or not (conditional on the firm being above the cutoff productivity and entering the domestic market in either scenario)