Two Firms, a and B, Both Produce Widgets

question 22

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 A will be

• A)$0.
• B)$6,000.
• C)$30,000.
• D)$60,000.
• E)None of the options

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Definitions:

Hypotension

A medical condition characterized by blood pressure that is lower than normal, which can result in symptoms like dizziness or fainting.

Coronary Heart Disease (CHD)

A disease characterized by the build-up of plaque in the coronary arteries, leading to reduced blood flow to the heart.

Depression

A common but serious mood disorder featuring persistent feelings of sadness, hopelessness, and a loss of interest or pleasure in daily activities.

Recurrent Heart Attacks

Experiencing multiple episodes of myocardial infarction, which is the interruption of blood supply to a part of the heart, causing heart cells to die.