Suppose a farmer in georgia begins to grow peaches. he uses $1,000,000 in savings to purchase land, he rents equipment for $80,000 a year, and he pays workers $150,000 in wages. in return, he produces 200,000 baskets of peaches per year, which sell for $3.00 each. suppose the interest rate on savings is 2 percent and that the farmer could otherwise have earned $45,000 as a shoe salesman.

(a)- the peach farmer earns economic profit of $ ?
(b)- the peach farmer earns accounting profit of $?

a) $305,000

b) $370,000

Explanation:

Given:

cost of land purchased = $1,000,000

Rent on equipment = $80,000

Wages paid = $150,000

Number of baskets produced = 200,000

Selling cost of basket = $3.00 each

Interest rate on savings = 2%

Earning as a shoe salesman = $45,000

Now,

Total revenue = Number of baskets produced × Selling cost of basket

= 200,000 × $3

= $600,000

Explicit cost = Rent on equipment + Wages paid

= $80,000 + $150,000

= $230,000

Implicit cost = Interest on amount spent to buy land + Earning as a shoe salesman

= 2% of $1,000,000 + $45,000

= $20,000 + $45,000

= $65,000

Therefore,

The total cost involved = Explicit cost + Implicit cost

= $230,000 + $65,000

=  $295,000

a) The peach farmer earns economic profit = Total revenue - Total cost

= $600,000 - $295,000

= $305,000

b) The peach farmer earns accounting profit = Total revenue - Explicit cost

=  $600,000 - $230,000

= $370,000

answer; 33,000;

answer; ///(d); determining who competes most closely   with whom evaluating whether industry driving forces and competitive pressure favor some strategic groups and hurt others, and ascertaining whether the profit potential of different strategic groups varies due to the strengths and weaknesses in each groups respective market positions;