Question

Suppose that a small family farm sold its output for $100,000 in a given year. The family spent $25,000 on fuel, $40,000 on seed, fertilizer, and pesticides, and $25,000 on equipment, including maintenance. The family members could have earned $10,000 working at other occupations. Refer to Scenario 13-21. What is the economic profit for the family farm

Answer 1

Answer:

0

Explanation:

Economic profit = accounting profit - implicit cost

Implicit cost is the cost of the next best option forgone when one alternative is chosen over other alternatives

accounting profit = revenue - explicit cost

Explicit cost includes the amount expended in running the business.

100,000 - (25,000 + 40,000 + 25,000) = 10,000

economic profit = 10,000 - 10,000 = 0