**Inverse Demand for Harley Davidson Motorcycles**The inverse demand for Harley Davidson motorcycles is represented by the equation:\[ P = 40,000 - 10Q \]where $ P $ is the price in dollars, and $ Q $ measures the number of units sold each month. Harley Davidson's current production involves a constant marginal and average cost of $16,000.**Tasks:**a. **Profit-Maximizing Price and Quantity:** Find the price and quantity that maximize profit for Harley Davidson motorcycles.b. **Impact of Tariffs:** Heavy tariffs on imported steel increase Harley’s marginal and average cost by $2,000. Determine how these tariffs affect Harley’s profit-maximizing price and quantity. Analyze the impact on Harley’s profits.

Given demand function :- P = 40,000 - 10Q MC = $16,000a) The profit function can be written as - π = PQ - cQ = (40,000 - 10Q)Q - 16,000Q = 24,000Q - 10Q2 First order condition for profit maximization :- 24,000 - 20Q = 0 or Q* = 1200 P* = 40,000 - 10(1200) = $28,000 These are the profit maximizing values of price and quantity of Harley Davidson motorcycles.b) New MC = 16,000 + 2,000 = $18,000 Hence, new profit π1 = (40,000 - 10Q1)Q1 - 18,000Q1 = 22,000Q1 - 10Q12 First order condition :- 22,000 - 20Q1 = 0 Q1* = 1100 P1* = 40,000 - 10(1100) = $29,000Old profit = 24,000(1200) - 10(1200)2 = $14,400,000 New profit = 22,000(1100) - 10(1100)2 = $12,100,000 Therefore we see that profit maximizing price rises while quantity falls, and profit also falls due to the imposition of tariff.

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Economics

15. The inverse demand for Harley Davidson motorcycles is P = 40, 000 – 10Q, where P is given by the price in dollars and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. a. Solve for the profit-maximizing price and quantity of Harley Davidson motorcycles. b. Heavy tariffs on imported steel drive up Harley's marginal and average cost by $2,000. How do these tariffs affect Harley's profit-maximizing price and quantity? How will the tariffs affect Harley's profits?

15. The inverse demand for Harley Davidson motorcycles is P = 40, 000 – 10Q, where P is given by the price in dollars and Q measures the number of units sold each month. Harley Davidson is currently producing motorcycles at a constant marginal and average cost of $16,000. a. Solve for the profit-maximizing price and quantity of Harley Davidson motorcycles. b. Heavy tariffs on imported steel drive up Harley's marginal and average cost by $2,000. How do these tariffs affect Harley's profit-maximizing price and quantity? How will the tariffs affect Harley's profits?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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