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The inverse demand for Harley Davidson motorcycles is given by P = 40,000 – 10Q, where P is 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?

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