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12.) ATech has fixed costs of $7 million and profits of $4 million. Its competitor, ZTech, is roughly the same size and this year earned

12.) 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?

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