Mr. Jernigan owns a piece of land on which he grows corn. Corn production annually requires $2,000 in seed, $7,000 in fertilizer, and $6,000 in pesticides. Mr. Jernigan uses his own labor to grow the corn and therefore hires no workers. If Mr. Jernigan did not use his time to grow corn, he would instead be able to sell insurance, earning $25,000 per year.Suppose another farmer has just offered to pay Mr. Jernigan rent of $15,000 per year for use of the land.If Mr. Jernigan refuses to rent the land to another farmer, then what will be his accounting costs from farming corn himself on his land? What will be his economic costs?Mr. Jernigan's accounting costs will be

Economic cost can be defined as the sum of cost paid to others i.e. implicit cost and opportunity cost or explicit cost which is the cost of next best alternative foregone.

Therefore,

Accounting cost = $2000 + $7000 + $6000 = $15,000

Economic cost = $2000 + $7000 + $6000 + $25,000 + $15,000 = $55,000

adeogunyemi adeogunyemi · Answer 2 · 2019-12-29T23:37:24+01:00

Answer:

Explicit costs are:

Annual cost of Seed=$2,000.

Annual cost of Fertilizer=$7,000

Annual cost of Pesticides=$6,000

Implicit costs:

Insurance earning forgone= $25,000
rent forgone on his piece of land= $15,000

If Mr. Jernigan refuses to rent the land to another farmer, is accounting costs for farming from his own land = $0.
His economic cost =Explicit cost+implicit cost= =$2,000+$7,000+$6,000+$25,000+$15,000= $55,000
Mr. Jernigan's accounting costs = Explicit cost

=$2,000+$7,000+$6,000= $15,000

Explanation:

Economic cost is means prudence of one course of action over another or alternative forgone. We have to consider money, time, and other resources cost. It is also known as implicit cost.

Accounting costs are also known as explicit costs. There are money paid out to other for day-to-day running of the business. They include cost of raw materials,wages, rent, fuelining expenses, etc.