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Answer :
Blake's economic profit is $130, which represents the amount left after subtracting all the costs, including explicit costs, implicit costs, and additional opportunity cost, from the total revenue.
Total revenue: Blake earns total revenue of $870 from planting wheat.
Explicit costs: Blake incurs explicit costs, which include the cost of renting a tractor ($50) and the cost of fertilizer ($150).
Implicit costs: Blake also incurs implicit costs, which include the opportunity cost of using the $5000 that could have been invested in his savings account at a 10 percent interest rate. The opportunity cost is the potential income he could have earned from the investment.
Additional opportunity cost: Blake gave up $130 that he could have earned at his other job by deciding to plant wheat. This represents an additional opportunity cost.
Calculation of economic profit: To calculate the economic profit, we need to subtract the explicit costs, implicit costs, and additional opportunity cost from the total revenue.
Economic profit = Total revenue - Explicit costs - Implicit costs - Additional opportunity cost
Economic profit = $870 - $50 - $150 - $5000 (opportunity cost) - $130 (additional opportunity cost)
Economic profit = $130
In conclusion, Blake's economic profit is $130, which represents the amount left after subtracting all the costs, including explicit costs, implicit costs, and additional opportunity cost, from the total revenue.
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