Two Firms,A and B,both Produce Widgets

question 32

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 cents per widget.Firm B has total fixed costs of $240,000 and variable costs of 75 cents 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 enters a recession,the after-tax profit of Firm A will be

• A) $0
• B) $6,000
• C) $30,000
• D) $60,000
• E) none of these

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Definitions:

Stomata

Small pores located on the surface of leaves and stems, enabling the exchange of gases between the plant and the surrounding atmosphere.

Guard Cells

Specialized cells in the epidermis of leaves, stems, and other organs that regulate gas exchange and water loss by controlling the size of stoma openings.

Vascular Bundle

Multistranded bundle of xylem, phloem, and sclerenchyma fibers running through a stem or leaf.

Endodermal

Relating to the innermost layer of the three primary germ layers in the embryo, giving rise to the gastrointestinal tract, liver, and lungs.