$$\begin{array}{l}
\begin{array} { | l | r | }
\hline \text { Assume an apple farmer incurs the following costs and revenues: } \
\hline \text { Fertilizer: } & \$ 200 \
\hline \text { Seeds: } & \$ 75 \
\hline \text { Water: } & \$ 250 \
\hline \text { Wages: } & \$ 750 \
\hline \text { Property taxes: } & \$ 600 \
\hline \text { Interest payments on borrowed funds: } & \$ 1,200 \
\hline \text { Sales of apples: } & \$ 4,000 \
\hline
\end{array}\
\text { Table } 22.1
\end{array}$$ Suppose the entrepreneur could earn $1,000 as an employee elsewhere.This means the accounting profit is
A) $1,525.
B) $925.
C) -$75.
D) -$1,000.

Question

$$\begin{array}{l}
\begin{array} { | l | r | } 
\hline \text { Assume an apple farmer incurs the following costs and revenues: } \
\hline \text { Fertilizer: } & \$ 200 \
\hline \text { Seeds: } & \$ 75 \
\hline \text { Water: } & \$ 250 \
\hline \text { Wages: } & \$ 750 \
\hline \text { Property taxes: } & \$ 600 \
\hline \text { Interest payments on borrowed funds: } & \$ 1,200 \
\hline \text { Sales of apples: } & \$ 4,000 \
\hline
\end{array}\
\text { Table } 22.1
\end{array}$$ Suppose the entrepreneur could earn $1,000 as an employee elsewhere.This means the accounting profit is
A) $1,525.
B) $925.
C) -$75.
D) -$1,000.

Quizplus · Accepted Answer

Accounting Profit = Total Revenue - Total Explicit Costs
Total Revenue = $2,000
Total Explicit Costs = $1,075 ($250 + $600 + $225)
Accounting Profit = $925
Since the entrepreneur could earn $1,000 as an employee elsewhere, the economic profit would be: 
Economic Profit = Accounting Profit - Opportunity Cost
Opportunity Cost = $1,000
Economic Profit = $925 - $1,000 = -$75
Therefore, the best choice is B, as it represents the accounting profit.

Suppose the Entrepreneur Could Earn $1,000 as an Employee Elsewhere