Question
Unskilled workers in a poor cotton-growing region must choose between working in a factory for $6,000 a year and being a tenant cotton farmer. Each
Unskilled workers in a poor cotton-growing region must choose between working in a factory for $6,000 a year and being a tenant cotton farmer. Each farmer can work a 120-acre farm, which rents for $10,000 a year. Such farms yield $20,000 worth of cotton each year. The total non-labor cost of producing and marketing the cotton is $4,000 a year. A local politician whose motto is "Working People Come First" has promised that if she is elected, her administration will fund a fertilizer, irrigation, and marketing scheme that will triple yield in her district, free of cost to the tenant farmers. Which of the following statements is FALSE in a post FIM short run equilibrium?
Hint: Cotton is an internationally traded commodity and tenant farmers in this district are price taking perfectly competitive firms. They cannot change the international price of cotton by their individual actions! Select all that apply.
A. The post FIM money cost = $14,000
B. The post FIM total revenue is equal to $60,000.
C. The post FIM short run profit of the tenant farmer equals $20,000.
D. The post FIM opportunity cost equals $6,000.
E. The post FIM Total Cost equals $40,000.
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