type 1 cars are unchanged. The cost functions for producing the two types of car are also unchanged. (a) Write down an expression for a representative rm (You might need to introduce some new notation). (b) Take two rst-order conditions for that rm. (c) What would the tax rates. 70,71 have to equal, in order for the equi- librium quantities (9le to be the same as the value; you found in question 1(d)? (d) What is the intuition for your answer to question 4(c)? 4. In the fourth setup there are only two firms, but both of them provide both types of car. You might think of this as the two firms competing against each other in two markets. Each firm chooses two quantities to provide, given the two quantities chosen by the other firm. The two firms are identical. Demand functions for the total quantity of type 0 cars, and for the total quantity of