1) The domestic demand for bicycles is given by Q = 32/0.3 - P/0.3 The foreign supply is given by P = 16 and domestic supply by Q = P/0.4 - 12/0.4.

i) Compute the price and quantity in equilibrium with free trade, and again in the presence of the tariff.

ii) Show the dead-weight loss

iii) Explain costs and benefits of a tariff.