Answer: The farmer's economic profit is $2,75,000.
Explanation:
Cost Incurred for Growing peaches (Explicit Cost) :
Rents equipment = $90,000 a year
Paid Wages = $1,50,000
Total Explicit cost = $2,40,000
Total Revenue(TR) Earned:
TR = Number of baskets of peaches produced per year × selling price of each peaches
= 2,00,000 × $3.00
= $6,00,000
Opportunity Cost (Implicit Cost):
Interest rate on savings ( 5 %) = 5% of $1,000,000
= $50,000
Farmer earn as a shoe salesman = $35,000
Total implicit cost = $85,000
<u>Economic Profit:</u>
Economic Profit = Total Revenue - Implicit cost - Explicit cost
= $6,00,000 - $85000 - $2,40,000
= $2,75,000
