4 Consider trade relations between Australia and New Zealand. Assume that the leaders of the two countries believe the pay-offs to alternative trade policies are as follows: Australia's decision Low tariffs High tariffs . Australia gains . Australia gains Low . New $10 billion . New $20 billion tariffs Zealand Zealand New Zealand's gains $10 billion gains $2 billion decision . Australia gains . Australia gains $2 billion High . New . New $4 billion tariffs Zealand Zealand gains $20 billion gains $4 billion a What is the dominant strategy for Australia? For New Zealand? Explain. b Define Nosh equilibrium. What is the Nash equilibrium for trade policy? c Under the Closer Economic Relations agreement, Australia and New Zealand both agreed to allow free trade in goods and services between the two countries. Do the perceived pay-offs as shown here justify this move to a bilateral free trade policy? d Based on your understanding of the gains from trade (discussed in Chapters 3 and 9), do you think that these pay-offs actually reflect a nation's welfare under the four possible outcomes? the