Suppose Lando Calrissian owns a smuggling business whose total revenue is $30,000 per month. The accompanying table shows Lando's monthly expenses. If Lando weren't a smuggler, he would earn $6,000 per month working for the Rebel Alliance. Apart from pay, Lando is indifferent between working as a smuggler and working for the Rebel Alliance. $$\begin{array} { | l | r | }
\hline \text { Fuel } & \$ 4,000 \
\hline \text { Mairterarce } & \$ 12,000 \
\hline \text { Weapors } & \$ 6,000 \
\hline \text { Bribes } & \$ 3,000
\end{array}$$
In the long run, we would expect Lando to:
A)join the Rebel Alliance since his accounting profit from smuggling is negative.
B)continue smuggling since his accounting profit from smuggling is positive.
C)continue smuggling since his economic profit from smuggling is positive.
D)join the Rebel Alliance since his economic profit from smuggling is negative.

Question

Suppose Lando Calrissian owns a smuggling business whose total revenue is $30,000 per month. The accompanying table shows Lando's monthly expenses. If Lando weren't a smuggler, he would earn $6,000 per month working for the Rebel Alliance. Apart from pay, Lando is indifferent between working as a smuggler and working for the Rebel Alliance. $$\begin{array} { | l | r | } 
\hline \text { Fuel } & \$ 4,000 \
\hline \text { Mairterarce } & \$ 12,000 \
\hline \text { Weapors } & \$ 6,000 \
\hline \text { Bribes } & \$ 3,000
\end{array}$$  
In the long run, we would expect Lando to:
A)join the Rebel Alliance since his accounting profit from smuggling is negative.
B)continue smuggling since his accounting profit from smuggling is positive.
C)continue smuggling since his economic profit from smuggling is positive.
D)join the Rebel Alliance since his economic profit from smuggling is negative.

Quizplus · Accepted Answer

Lando's total expenses for smuggling are $25,000 ($4,000 + $12,000 + $6,000 + $3,000). His total revenue from smuggling is $30,000. Therefore, his accounting profit from smuggling is $5,000 ($30,000 - $25,000). However, if Lando weren't smuggling, he would earn $6,000 per month working for the Rebel Alliance. This $6,000 is an opportunity cost of smuggling. When considering this opportunity cost, his economic profit from smuggling is negative ($5,000 - $6,000 = -$1,000). Therefore, in the long run, considering economic profit, Lando would join the Rebel Alliance.

Suppose Lando Calrissian Owns a Smuggling Business Whose Total Revenue