Question 3 and question 4 QUESTION 3 Hamish currently owns an avocado farm which
ID: 1136965 • Letter: Q
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Question 3 and question 4
QUESTION 3 Hamish currently owns an avocado farm which in the past has been highly profitable with revenues of $75,000/year. Recently, a large storm killed his trees and destroyed a large amount of his specialised avocado farming equipment. Costs are estimated to be at least $30,000 to replace the specialised equipment. He is trying to decide whether to replant new avocado trees or to plant orange trees instead Select the item from the list provided to make the following statements true For Hamish to consider leaving the avocado market, he must be experiencing a / an 1. Accounting profit 2. -$2000/year 3. implicit cost If Hamish chose to replant and grow avocados, he would 4. know he made the correct decision in later years if he makes 5. a / an Economic profit Economic loss 6. Anormal profit 7. $12000/year 8. $33000lyear 9. Explicit cost 10. $45000/year 11. $1900 From an economic perspective, a / an Hamish in growing avocados would be his opportunity cost. forExplanation / Answer
3.
A.For Hamish to consider leaving the avocado market he must be experiencing an economic loss.
This means that his revenue must be lesser than the sum of explicit and implicit cost(opportunity cost) of production.
B.Economic profit.
His revenue must be greater than the sum of implicit and ecpexpli cost for him to earn profits in the long run.He wontw stay in business if there is not prospect of earning profits in the long run.
C.Implicit cost.
Implicit costs are opportunity cost of production.
4.Total earning from babysitting in a week=295+104=$399
Total earnings from working in retail=$357
Opportunity cost of not working in retail is $357
Economic profit of Maggie=Total earnings-opportunity cost of leaving the job
399-357=42
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