Question

Joe's economic profit is $ (Do NOT press Enter after typing the answer in each cell. Use Tab or take the cursor to the next cell) Joe owns 120 acres of land in Minnesota, which he uses for growing corn and soybeans. Given his average crop yields and prices for both crops, his average revenue has been about $1 million per year over the last few years. His explicit costs are shown in the table below. Submit Do you know the answer? Inputs Cost dollars) Seed $140,000 Fertilizer 135,000 Other 400,000 > I know it Think so Unsure No idea Joe owns his land, so he does not have to pay rent. Joe's neighbor, Bill, rents a farm of approximately the same size, and Bill pays rent of $200,000 a year. Joe and Bill each value their own labor at $100,000 per year.

Answer 1

Economic profit is defined as total revenues minus total cost.

And total cost includes both implicit and explicit cost.

So, economic profit= 1,000,000 - (140,000+ 135,000 + 400,000 + 100,000 + 200,000)

= 1,000,000 - 975,000

= 25,000$