Atech has fixed costs of $10.0 million and profits of $5 million. Its competitor, ZTech, is roughly the same size and this year earned the same profits, $5 million. However, ZTech operates with fixed costs of only $0.25 million but higher variable costs. a. Calculate the operating leverage for each firm. (Round your answers to 2 decimal places.)

b. Which firm will likely have higher profits if the economy strengthens?

multiple choice

• ATech

• ZTech