Question

1. Suppose you can either farm corn or soybeans. If you grow corn, you earn a...

1. Suppose you can either farm corn or soybeans. If you grow corn, you earn a Total Revenue of \$99,000 and your Explicit Costs are \$89,000. If you grow soybeans, you earn a Total Revenue of \$110,000 and your Explicit Costs are \$98,000. What are the Implicit Costs of growing corn?

a. \$110,000

b. \$89,000

c. \$12,000

d. \$10,000

2. Suppose you can either farm corn or soybeans. If you grow corn, you earn a Total Revenue of \$99,000 and your Explicit Costs are \$89,000. If you grow soybeans, you earn a Total Revenue of \$110,000 and your Explicit Costs are \$98,000. What is the Economic Profit (or Loss) of growing corn?

Group of answer choices

a. \$12,000

b. \$10,000

c. \$2,000

d. −\$2,000

1)

Implicit is the indirect cost you incurred in order to choose an alternative you have chosen. Here in order to grow corn you have sacrifice a profit that you can earn while growing soybeans. Thus implicit cost is a profit you sacrifice in order to grow crops

Profit(Accounting) you would earn if you produce soybeans = Total Revenue - Explicit cost = 110,000 - 98,000 = 12,000.{Note accounting profit = Total Revenue - Explicit cost}.

Thus, Implicit cost = 12,000

Hence, the correct answer is (c) \$12,000.

2)

Economic profit = Total Revenue - Explicit cost - Implicit cost.

As calculated above implicit cost = 12000.

Thus, Economic profit of growing corn = 99,000 - 89,000 - 12,000 = -2000

Hence, the correct answer is (d) -\$2,000

Earn Coins

Coins can be redeemed for fabulous gifts.