Consider the standard (static) Hotelling model we discussed in the class. Recall that firm 0 and firm 1 engage in pricing competition in a linear city. The two firms have the same constant marginal cost of production. We know in Nash equilibrium, the two firms charge the same price, Po = P1 Now, during the COVID19 pandemic, firm 1's supply chain has been affected and, as a result, its marginal production cost has increased. However, firm 0 is not affected at all - this means firm O's marginal cost of production is unchanged. Assume everything else stays the same as in the standard model. Answer the following questions by comparing the scenario during the pandemic against that before the pandemic. a) Does the change of marginal cost of firm 1 cause a change in firm 0's best response function? b) Consider the new price equilibrium during the pandemic and denote it as (POP1 ). In comparing the equilibrium before and during the pandemic, is Po higher or lower than po ? c) In the new equilibrium, is p higher or lower than p, ? d) Which firm has a higher profit in the new equilibrium, firm 0 or firm 1? e) Do you think the total surplus in the new equilibrium is increased or decreased compared with that before the pandemic