If the economy enters a recession,the total cost of Firm C will be ________.
A)$1,680,000
B)$1,170,000
C)$750,000
D)$420,000
E)none of the above

Question

Quizplus · Accepted Answer

To find the cost of Firm C during a recession, we need to calculate: 
Fixed costs + Variable costs during a recession.
Fixed costs during a recession will remain the same at $600,000.
Variable costs during a recession will increase by 50%, so the new variable cost will be $600,000*1.5 = $900,000.
Total cost during a recession = $600,000 + $900,000 = $1,500,000.
Therefore, the cost of Firm C during a recession will be $1,500,000 - $330,000 (savings from reducing fixed costs) = $1,170,000. Thus, the answer is B.

If the Economy Enters a Recession,the Total Cost of Firm