Two Firms, C and D, Both Produce Coat Hangers

question 10

Multiple Choice

Two firms, C and D, both produce coat hangers. The price of coat hangers is $1.20 each. Firm C has total fixed costs of $750,000 and variable costs of 30¢ per coat hanger. Firm D has total fixed costs of $400,000 and variable costs of 50¢ per coat hanger. The corporate tax rate is 40%. If the economy is strong, each firm will sell 2,000,000 coat hangers. If the economy enters a recession, each firm will sell 1,400,000 coat hangers. If the economy enters a recession, the before-tax profit of firm C will be

• A) $1,680,000.
• B) $1,170,000.
• C) $510,000.
• D) $204,000.

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Definitions:

Committed Fraud

Refers to the act of deliberately deceiving someone in order to gain an unfair or illegal advantage, often financial.

Regulatory Mutations

Changes in the DNA that affect the regulation of gene expression without altering the gene's coding sequence.

Protein-Coding Sequence

A protein-coding sequence is a segment of DNA or RNA that contains the information necessary to construct a protein, critical for the functioning of cells and organisms.

Adaptation

An inherited aspect of an individual that allows it to outcompete other members of the same population that lack the trait (or that have a different version of the trait). Adaptations are traits that have evolved through the mechanism of natural selection.