Only answer the last sentence please Suppose bikes are produced by many internat

Question

Only answer the last sentence please

Suppose bikes are produced by many international companies at world price PW, but there is only one Swiss company that produces them. Therefore, as in class, without trade the Swiss firm would be a monopolist at home. With trade on the other hand, since Switzerland is a relatively small country, its consumers would be able to import any number of bikes at the world price PW Suppose the Swiss monopolist's marginal cost equals MC =-4 + Q. Therefore, he/she would be willing to supply up until the point where this cost equals the price and supply in Switzerland must equal Assume that Switzerland's demand is D=20-P Switzerland's import demand is M=16-2,P

Explanation / Answer

The World Price is 4.

Switzerland has imposed a tariff, t = 2.

Now,

Domestic price in Switzerland = World Price + Tariff = 4 + 2 = 6

Consumer demand after tariff = 20 - P = 20 - 6 = 14

Producer supply after tariff = 4 + P = 4 + 6 = 10

Imports = Consumer demand after tariff - Producer supply after tariff = 14 - 10 = 4

So, if Switzerland imposes a tariff, t=2, then,

Supply will increase by 2.

Demand will decrease by 2.

Imports will decrease by 4.

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