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Two firms, C and D , both produce coat hangers. The price of coat hangers is $ 1 . 2 0 each. Firm C has
Two firms, and D both produce coat hangers. The price of coat hangers is $ each. Firm has total fixed costs of $ and variable costs of per coat hanger. Firm D has total fixed costs of $ and variable costs of per coat hanger. The corporate tax rate is If the economy is strong, each firm will sell coat hangers. If the economy enters a recession, each firm will sell coat hangers.
If the economy enters a recessioh the aftertax profit of firm C will be
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