Scenario 13-6
Tony is a wheat farmer, but he also spends part of his day teaching guitar lessons. Due to the popularity of his local country western band, Farmer Tony has more students requesting lessons than he has time for if he is to also maintain his farming business. Farmer Tony charges $25 an hour for his guitar lessons. One spring day, he spends 10 hours in his fields planting $130 worth of seeds on his farm. He expects that the seeds he planted will yield $300 worth of wheat.
-Refer to Scenario 13-6.Tony's economic profit equals
A) $-130.
B) $-80.
C) $130.
D) $170.

Question

Quizplus · Accepted Answer

Tony's economic profit is calculated by subtracting both explicit and implicit costs from total revenue. The explicit cost is $130 for seeds, and the implicit cost is the opportunity cost of not teaching guitar lessons for 10 hours, which is $250 (10 hours x $25/hour). The total revenue from the wheat is $300. Therefore, the economic profit is $300 - $130 - $250 = $-80.

Scenario 13-6 Tony Is a Wheat Farmer, but He Also Spends Part