Question

90 bin des M. Jerniga wspiece of land on which he grows Compr e s s ed $2.000 in workers. If Morriso not use to grow he would be we wil we g 535.000 pery Suppose other fore t a gne 2000 per year form of the land FMr. Jamianses to the other then what will be com ing so on Mc Jewis accordings will be spery, und in economico il bas per year e n and w gingers

Mr. Jernigan owns a piece of land on which he grows corn. Corn production annually requires ​$6 comma 0006,000 in​ seed, ​$3,000 in​ fertilizer, and ​$10,000 in pesticides. Mr. Jernigan uses his own labor to grow the corn and therefore hires no workers. If Mr. Jernigan did not use his time to grow​ corn, he would instead be able to sell​ insurance, earning ​$35,000 per year.
Suppose another farmer has just offered to pay Mr. Jernigan rent of ​$20,000 per year for use of the land.
If Mr. Jernigan refuses to rent the land to another​ farmer, then what will be his accounting costs from farming corn himself on his​ land? What will be his economic​ costs?
Mr.​ Jernigan's accounting costs will be ​$nothing per​ year, and his economic costs will be ​$ per year. ​(Enter numeric responses using​ integers.)

Answer 1

Accounting cost only includes the explicit costs. So, total accounting costs = sum of explicit costs = cost of seed + cost of fertilizer + cost of pesticides = $6,000 + $3,000 + $10,000 = $19,000.

Economic costs includes opportunity costs in additions to the explicit costs. Here, opportunity costs are the income given up as insurance seller and the rent foregone. So, total opportunity cost =  ​$35,000 +  ​$20,000 =  ​$55,000.

Economic costs = Accounting costs + opportunity costs = $19,000 + $55,000 = $74,000.