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Two firms, A and B, both produce brushes. The price of brushes is $1.95 each. Firm A has total fixed costs of $451,500 and variable
Two firms, A and B, both produce brushes. The price of brushes is $1.95 each. Firm A has total fixed costs of $451,500 and variable costs of 63 cents per brush. Firm B has total fixed costs of $261,500 and variable costs of 87 cents per brush. The corporate tax rate is 35%. If the economy is strong, each firm will sell 1,515,000 brushes. If the economy enters a recession, each firm will sell 972,500 brushes.
Calculate Firm B's degree of operating leverage.
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