Question

A farmer plans to harvest Maize on his own specific land. Discuss all the factors which he needs to harvest the whole season of crop. Also mentioned their reward, difference between economic profit and accounting profit, implicit and explicit cost and average cost also?

Answer 1

The factors of production are land,labour,capital and entrepreneurship. The farmer is the entrepreneur since he has the idea of harvesting maize and his reward will be profit. The farmer owns the land and it's reward is rent. He needs labourers to harvest the maize and there reward will be wages. The maize farmer also requires capital for the whole harvesting process to take place and the reward for capital is interest. Economic profit is the total revenue minus the opportunity cost while accounting profit is the difference between total revenue and explicit cost. Implicit cost is the opportunity cost while explicit cost is the expense paid with tangible assets owned by the farmer like maize