Question 2 (20 points). Suppose that a person owes $100 in taxes to the government. The person can either pay the $100 or cheat and pay nothing. The government can either audit this person or not audit him; the decision about whether to audit is made without knowing what choice the person made. If the government audits a person who picked Cheat, the tax evasion is discovered and the person must pay $150 to cover both his taxes and a fine imposed on detected cheaters. Auditing is costly; when the government audits a person, both the government and the person lose $10 (this cost must be paid regardless of whether the person chose Cheat or Pay). (a) Fill in the two missing numbers in the following payoff matrix. Person Cheat Pay * Government Audit -160, 140 -110, -100, 100 Not *, 0 (b) Find the best-response rules for the government and the person when mixed strategies are considered. (c) Depict the two best-response rules on one diagram to find all (pure-strategy and mixed- strategy) Nash equilibria. (d) For the mixed-strategy Nash equilibrium that you found in part C, calculate each player's expected payoff.