Use the information below to answer the following questions.
Fact 12.4.1
Franklin is a fiddlehead farmer. He sold 10 bags of fiddleheads last month, with total fixed cost of $100 and total variable cost of $50.
-Refer to Fact 12.4.1. Suppose the price of fiddleheads is expected to stay at $10 per bag for the foreseeable future, and Franklin's production and cost figures are expected to stay the same. His total fixed cost consists entirely of rent on land, and his five-year lease on the land runs out at the end of the month. Should Franklin renew the lease?
A) Yes, because total revenue will still cover total fixed cost.
B) Yes, because total revenue will still cover total variable cost and a portion of total fixed cost.
C) No, because total revenue must cover all costs for factors of production to remain in fiddlehead farming in the long run.
D) No, because in the long run, zero economic profit is a signal to move factors of production out of fiddlehead farming.
E) Insufficient information to answer.
Correct Answer:
Verified
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