We are told that farm er Jones used to work as a scho ol teacher until very rece

ID: 1215610 • Letter: W

Question

We are told that farmer Jones used to work as a school teacher

until very recently for an yearly salary of $70,000 (all teaching related

expenses covered by the school) and he can go back to teachingat his old

job and salary if he wants to

but currently he is engaged full

time in operating a soybean farm. His a

ccounts show that he annually spends

$100,000 on hired labour, $30,000 on fertilizers, $60,000 on water,

electricity and rent on the land all together (he does not own the land).

These are the only costs he has to pay for out of pocket. His a

ccounts also

show that his annual

revenue from sales of

soya bean amounts to

an annual

sum of $250,000. Jones thinks he is doing well and should stick

to his farm

just because of the profit he is

making. Would you agree or disagree? How

much profit is he making?

I am not agree that Jone is making maximum profit which he can make. By working in soyabean farm, he earns

Profit = Total revenue - Total cost = 250,000 - (100,000 + 30,000 +60,000) = 250,000 - 190,000 = $ 60,000

On the other hand, by working as teacher he can earn $ 70,000. So, to maximise profit, John has to act as a teacher.

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