4. Two firms in the same industry sell their product at $50 per unit, but one...

4. Two firms in the same industry sell their product at $50 per unit, but one firm has TFC = $800 and AVC = $10 while the other has TFC’ = $1350 and AVC’ = 5.

a. Determine the breakeven quantity of each firm.

b. Find the degree of operating leverage for each firm at Q = 40 and Q =50.

*Please show work

Expert Solution

Answer.

a. Break even quantity for firm 1 is 20 units and for firm 2 is 30 units

b. Degree of operational leverage for firm 1 is 2.0 and for firm 2 is 2.5.

Rahul Sunny answered 2 years ago

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