Two Firms,A and B,both Produce Widgets

question 77

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 is strong,the after-tax profit of Firm A will be ______.

• A) $0
• B) $6,000
• C) $36,000
• D) $60,000
• E) none of these

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