What is the farmers accounting profit

Reference no: EM131984590

Problem

Suppose a farmer in Georgia begins to grow peaches. He uses $1,000,000 in savings to purchase land, he rents equipment for $50,000 a year, and he pays workers $150,000 in wages. In return, he produces 300,000 baskets of peaches per year, which sell for $3.00 each. Suppose the interest rate on savings is 11 percent and that the farmer could otherwise have earned $40,000 as a shoe salesman.

What is the farmer's economic profit?
What is the farmer's accounting profit?

Reference no: EM131984590

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