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(a) For the following stage game, check whether the strategy profile given (below) is a subgame- perfect equilibrium of the game in which the stage game is repeated infinitely many times. The discount rate is 6 = 0.9. Stage Game: Player 2 M R T (3,1) (0,0 (-1,2 Player 1 M (0,0) (0,0) (0,0) B (-1,2) (0,0) (-1,2) Strategy profile: Until some player deviates, player 1 plays T and player 2 plays L. If anyone deviates, then each plays M thereafter. (b) Consider the following stage game: Player 2 C D (1,1) (-1,3) Player 1 C D (2,-1) (0,0) Suppose that this game is played infinitely many times with discount factor 6. Consider the following strategies: Play C if all previous outcomes have been (C, C), otherwise, play D forever. For what values of o are these strategies a Nash equilibrium?13 This question is about the welfare effects of a tariff. The following figure illustrates Home's market for some good where P denotes the price of the good, 0 is the quantity of the good. 8 denotes Home's supply curve and D denotes Home's demand curve. [Please note that the gure is a sketch and the scaling might not t.) Assume the situation Is as follows: The wodd market price without tariff ls Pw=80. Home's supply and demand without tariff are S1=50 and D1=90, respectively. The internal market price In Home with tariff is PT=90. The external market price with tariff is P1'=75. Home's supply and demand with tariff are 52:70 and Dz=85. respectively. Moreover, X=150 and Y=50. a) How much of the good ls imported by Home ifthe tariff is In place? With tariff Home's imports are [:l b) How large is the tariff? The tariff is |:| c) The producer surplus in the absence of the tariff is D. [You are asked to insert a number.) d) The producer surplus with the tariff is ':| (You are asked to insert a number.) e) How has the tariff affected the producer surplus? The produoer surplus has :|. (Indicate the direction of change.) This question is about monopolistic competition and trade. Assume that firms in the automobile industry face the following price function P = 20000 + 2500 n where P is the equilibrium unit price a single firm demands and n denotes the number of firms that operate in the market. The average cost each firm faces is AC = 50000 .