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 is strong, the after-tax profit of Firm B will be

Question

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To find the after-tax profit of Firm B in a strong economy:  1. Calculate total revenue: 1,200,000 widgets * $1 = $1,200,000.  2. Calculate total costs: Fixed costs ($240,000) + Variable costs (1,200,000 * $0.75) = $1,140,000.  3. Calculate pre-tax profit: $1,200,000 - $1,140,000 = $60,000.  4. Calculate after-tax profit: $60,000 * (1 - 0.40) = $36,000.

Two Firms, a and B, Both Produce Widgets