Consider the standard {static} Hotelling model we discussed in the class. Recall that rm 0 and rm 1 engage in pricing competition in a linear city. The two rms have the same constant marginal cost of production. We know in Nash equilibrium, the two rms charge the same price, 29;] I 29-1 . Now during the COVIDlQ pandemic, rm 1's supply chain has been affected and, as a result. its marginal production cost has increased. However rm 0 is not affected at all this means rm D'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 rm 1 cause a change in rm 0's best response function? L 1- b) Consider the new price equilibrium during the pandemic and denote it as (ol) . In comparing the equilibrium before and during the pandemic, is 530 higher or lower than pi] ? c In the newe uilibrium, is'c' hi her orlower than A" ? : J q p 0 El pl d) Which rm has a higher prot in the new equilibrium, rm 0 orrm 1? = e} Do you think the total surplus in the new equilibrium is increased or decreased compared with that before the pandemic