ATech has fixed costs of $7 million and profits of $4 million. Its competitor, ZTech, is roughly

Question:

ATech has fixed costs of $7 million and profits of $4 million. Its competitor, ZTech, is roughly the same size and this year earned the same profits, $4 million. But it operates with fixed costs of $5 million and lower variable costs.
a. Which firm has higher operating leverage?
b. Which firm will likely have higher profits if the economy strengthens?