Two firms, A and B, both produce gadgets. the price of gadgets is $2 each. Firm A has total fixed costs of $1000,000 and variable costs of $1.00 per gadget. Firm B has total fixed costs of $300,000 and variable costs of $1.40 per gadget. The corporate tax rate is 30% If the economy is strong, each firm will sell 2,000,000 gadgets. If the economy enters a recession, each firm will sell 1,000,000 gadgets. If the economy enters a recession the after tax profit of Firm B will be: Choices are
This solution goes through accounting concepts such as calculating after tax profits.