Two Firms, a and B, Both Produce Widgets

question 33

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. Calculate firm B's degree of operating leverage.

• A).714
• B)9.09
• C)7.86
• D)7.14

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Definitions:

Colostomies

Surgical procedures that create an opening from the colon to the surface of the abdomen, allowing for the diversion of bowel contents.

Stoma

An artificially created opening in the body, such as for the discharge of body wastes, often related to procedures like colostomies or urostomies.

Loperamide

An anti-diarrheal medication used to reduce the frequency of diarrhea by slowing down the movement of the gut.

Antidiarrheal

A medication or treatment designed to stop or reduce diarrhea.