Respuesta :
Answer:
a. Short-run economic profit: $ 40,000 per lease.
Long-run economic profit: $ 0 per lease.
b. Landowners would gain $40,000 per plot each year due to higher rent for land
Explanation:
The short-run economic profit for a cotton farmer is:
Economic profit = Total revenue - Explicit costs - Implicit costs = $60,000 - $14,000 - $6,000 = $40,000 per lease.
Landowners would reap the long-term benefits of the scheme. Their income would rise by $40,000 per year per 120-acre plot because rent would rise from $10,000 to $50,000.
The correct values are:
(a). Short-run economic profit would be $40,000 per lease.
Long-run economic profit would be $0 per lease.
(b). Landowners gain each year is $40,000 per plot due to advanced rent for land.
What is economic profit?
Economic profit is defined as the difference between the revenue obtained from the sale of any product and the costs of all input signal, considering opportunity costs.
The formula of Economic profit is:
[tex]\text{Economic Profit} = \text{Total Revenue} -\text{ Explicit Costs}- \text{Implicit Costs}[/tex]
Computations:
(a).
The short-run economic profit for a cotton farmer is:
According to the given situation,
Total Revenue = $60,000,
Explicit costs = $14,000,
Implicit costs =$6,000.
Now, substitute the given values in the above formula:
[tex]\text{Economic Profit} = \text{Total Revenue} -\text{ Explicit Costs}- \text{Implicit Costs}\\\\\text{Economic Profit} = \$60,000 - \$14,000 - \$6,000\\\\\text{Economic Profit} = \$40,000 \text{Per lease.}[/tex]
(b). Landowners would gather the long-term performances of the strategy. Their income would rise up by $40,000 yearly on per 120-acre strategy because rent would arise from $10,000—$50,000.
Therefore, the gain of landowner each year is $40,000.
Learn more about the economic profit, refer to: