Question

Ziva is an organic lettuce farmer, but she also spends part of her day as a professional organizing consultant. As a consultant, Ziva helps people organize their houses. Due to the popularity of her home-organization services, Farmer Ziva has more clients requesting her services than she has time to help if she maintains her farming business. Farmer Ziva charges $25 an hour for her home-organization services. One spring day, Ziva spends 10 hours in her fields planting $130 worth of seeds on her farm. She expects that the seeds she planted will yield $300 worth of lettuce.

Refer to Scenario 13-6. Ziva's economic profit from farming equals

Select one:

a. $-130.

b. $-80.

c. $130.

d. $170.

Answer 1

Ans. Correct Option is b.-80

Explanation-

Implicit Cost = Price she charges x hours

                      = 25 x 10 = 250

Explicit Cost = $130

Revenue she will generate by planting = $300

Economic profit = Revenue - (eplicit cost + Implicit Cost )

                          = 300 - ( 130 + 250)

                          = 300 - 380 = - 80

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