Suppose a farmer in georgia begins to grow peaches. he uses $1,000,000 in savings to purchase land, he rents equipment for $90 comma 00090,000 a year, and he pays workers $130 comma 000130,000 in wages. in return, he produces 100 comma 000100,000 baskets of peaches per year, which sell for $4.004.00 each. suppose the interest rate on savings is 55 percent and that the farmer could otherwise have earned $45 comma 00045,000 as a shoe salesman.
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Ответ:
The peach farmer earns economic profit of $80,000
Therefore, accounting profit is $180,000
Explanation:
Economic Profit is calculated by deducting the opportunity cost and monetary costs from the revenue. Whereas Accounting Profit can be calculated by deducting the only monetary costs from the revenue.
Economic profit = Revenue - Opportunity cost - Monetary cost
Accounting profit = Revenue - Monetary cost
Opportunity costs are all those losses which are faced for choosing an alternative like loss of interest income in case of investment in the business.
In Economic term opportunity costs is known as implicit cost and monetary cost as explicit cost. Formula are
Economic profit = Revenue - Implicit cost - Explicit Expenses
Accounting profit = Revenue - Explicit cost
Implicit Costs
Interest Income = 5.5% x $1,000,000 = $55,000
Salary = $45,000
Total = $100,000
Explicit costs
Rent = $90,000
Wages = $130,000
Total = $220,000
Revenue = $100,000 x 4.00 = $400,000
Economic Profit = $400,000 - $100,000 - $220,000 = $80,000
Accounting Profit = $400,000 - $220,000 = $180,000
Ответ:
B
Step-by-step explanation: