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Suppose you're considering making an investment in one of two firms. Firm A has fixed costs that account for 50% of total costs. Firm B
Suppose you're considering making an investment in one of two firms. Firm A has fixed costs that account for 50% of total costs. Firm B has fixed costs that account for 80% of total costs, and variable costs account for 20% of total costs. Assuming everything else is equal and that you're risk-averse, which firm would invest in and why?
a. Firm B because it's less risky
b. Firm A because it's less risky
c. There isn't enough information
d. It doesn't matter because both firms have a similar amount of risk
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