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Two firms, A and B, both produce brushes. The price of brushes is $1.40 each. Firm A has total fixed costs of $450,400 and variable
Two firms, A and B, both produce brushes. The price of brushes is $1.40 each. Firm A has total fixed costs of $450,400 and variable costs of 52 cents per brush. Firm B has total fixed costs of $260,000 and variable costs of 72 cents per brush. The corporate tax rate is 30%. If the economy is strong, each firm will sell 1,504,000 brushes. If the economy enters a recession, each firm will sell 978,000 brushes.
Calculate Firm A's degree of operating leverage.
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