Two Firms, a and B, Both Produce Widgets

question 66

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 enters a recession, the after-tax profit of Firm B will be

• A)$0.
• B)$6,000.
• C)$36,000.
• D)$60,000.
• E)None of the options

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