Question

Suppose that a small family farm sold its output for $100,000 in a given year. The family spent $25,000 on fuel, $40,000 on seed, fertilizer, and pesticides, and $25,000 on equipment, including maintenance. The family members could have earned $20,000 working at other occupations.

What is the economic profit at the family farm?

Answer 1

First we have to evaluate our income: $100,000. And then the expenditure (sum of all expenses): $25,000 + $40,000 + $25,000 = $90,000. This is the expenditure, taken away from our income we get $10,000, this is the economic profit of the family farm.

Answer 2

The economic profit is $10,000.

Explanation:

A small family farm sold its output for $100,000

The family spent on fuel = $25,000

The family spent on seed fertilizer and pesticides = $40,000

The family spent on equipment and maintenance = $25,000

They spent total = 25,000 + 40,000 + 25,000

= $90,000

The economic profit at the family farm = 100,000 - 90,000

= $10,000

The economic profit is $10,000.