value: 1.00 points Two firms, A and B, both produce widgets. The price of widget

Question

value: 1.00 points 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 50c 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 O so. O $6,000 O $30,000 O $60,000 None of the options

Explanation / Answer

after tax profit in a recession = (1,100,000*0.5 - 500.000)*0.6

after tax profit in a recession = 30,000

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