4 Suppose a farmer in Georgia begins to grow peaches. He uses $1,000,000 in savi

Question

4

Suppose a farmer in Georgia begins to grow peaches. He uses $1,000,000 in savings to purchase land, he rents equipment for $70,000 a year, and he pays workers $150,000 in wages. In return, he produces 300,000 baskets of peaches per year, which sell for $3.00 each. Suppose the interest rate on savings is 3 percent and that the farmer could otherwise have earned $25,000 as a shoe salesman What is the farmer's economic profit? The peach farmer earns economic profit of S What is the farmer's accounting profit? The peach farmer earns accounting profit of $1 ·Enter your response as an integer.) ·(Enter your response as an integer)

Explanation / Answer

Answer.)

a.) Economic Profit = Total Revenue - Economic cost

= (300,000)x($3.00) - ( $1,000,000 + $70,000 + $150,000 + $25,000 + 30,000) = -$375000

Its an economic loss

b.) Accounting Profit = Total Revenue - accouting cost

= (300,000)x($3.00) - ( $1,000,000 + $70,000 + $150,000) = -$320000

Its an accounting loss.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.