Two Firms, a and B, Both Produce Widgets

question 31

Multiple Choice

Two firms, A and B, both produce widgets.The price of widgets is $1 each.Firm A has total fixed costs of $500,000 and variable costs of 50'per widget.Firm B has total fixed costs of $240,000 and variable costs of 75' per widget.The corporate tax rate is 40%.If the economy is strong, each firm will sell 1,200,000 widgets.If the economy enters a recession, each firm will sell 1,100,000 widgets. If the economy is strong, the after-tax profit of Firm A will be

• A)$0.
• B)$6,000.
• C)$36,000.
• D)$60,000.

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Definitions:

Distribution

The process of delivering products, goods, or services from the production point or supplier to the end consumer.

Price Adjustment Contract

A contractual agreement that allows for changes in the price based on certain conditions or indices, often used to account for inflation or cost increases.

Economic Changes

Adjustments or shifts in the conditions of an economy, affecting factors like prices, jobs, and wealth distribution.

Currency Values

The worth of different forms of money in terms of one another, impacting international trade and economics.