E202PracticeExam2.5

E202PracticeExam2.5 - Such a farm yields $20,000 worth of...

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Chapter 8 7. Bert Jones owns and operates a laundry whose monthly revenue is $9,000. Bert could earn $4,000 a month elsewhere if he did not run the laundry. Monthly expenses are: Labor $1,700 Electricity 100 Rent 3,300 Interest on loan for equipment 900 a. Calculate Bert’s monthly accounting profit. b. Is the laundry making an economic profit? Should Bert stay in the laundry business? Explain. 8. Workers in a poor cotton-growing region choose between working in a factory at $6,000 a year or being a tenant cotton farmer. One farmer can work a 120 acre farm that rents for $10,00 a year.
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Unformatted text preview: Such a farm yields $20,000 worth of cotton each year. The total nonlabor cost of producing the cotton is $4,000 a year. The local government decides to provide free fertilizer that would triple cotton yields. a. If the price of cotton is unaffected, how would this program affect the income of tenant farmers in the short run? In the long run? b. Who would benefit from the program in the long run? How much would they gain each year?...
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