. A3. Explain why global free trade maximizes the welfare of the world. Consider two economies of comparable sizes. Explain why each of them has an incentive to restrict trade. What is the Nash equilibrium if both of the countries choose an optimal tariff, assuming that the other country does not retaliate? Use this example to explain the meaning of the Prisoners' Dilemma. What can the World Trade Organization do to help improve the welfare of the world (and the countries)? . A4. Consider a commodity market in two economies of comparable sizes. Both economies have positive production and consumption of a commodity. Initially free trade exists between the economies. Explain how a nonprohibitive tariff imposed by the government of the importing country may affect the price levels in both economies. How will the tariff affect the welfare of the exporting country? Use diagram(s) to assist your answer. . A5. Economists have provided a model to explain how an export subsidy may benefit the local economy. Without providing the details of the model, present the intuition of how an export subsidy may benefit the imposing country. Explain also why the model and the analysis have been criticized in terms of (in each of the following cases): (a) the presence of local consumers; (b) the presence of many firms in the industry; (c) the existence of many industries that deserve export subsidies; (d) political economy