The Text Estimated the Deadweight Loss of Protection on Harley-Davidson

question 38

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The text estimated the deadweight loss of protection on Harley-Davidson motorcycles during the 1980s was about 3.8% of the annual value of imports or about $1,125.5 million over the four years that the tariffs were used. This estimate is based on this formula for the deadweight loss of a tariff, measured relative to the import value: Recalculate these deadweight losses, assuming that there were 200,000 comparable motorcycles imported before the tariff and 150,000 comparable motorcycles imported after the tariff was imposed; that average import sales were $800 million in each year the tariff was applied; and that the tariff was 50% over the four-year period (compared with the declining tariff of 45%, 35%, 20%, and 15% actually used over the four- year period).

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Definitions:

Traceable Fixed Expenses

Fixed costs that can be directly linked to a specific department, project, or segment of a business.

Common Fixed Expenses

Overhead costs that do not vary with the level of production or sales, shared across different segments of a business.

Business Segments

Distinct parts of a company that can be separately identified by the products or services they offer or by geographic regions.

Break-Even Calculations

An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue, indicating no net loss or gain.