Questions I am having difficulty understanding

Question

Fred owns 10 hectares of farming land. He can farm the land himself producing a crop worth $240,000. The explicit costs involved are 60,000. His best alternative is to rent the land to his neighbour for $120,000 and work in the local city earning $100,000.

(a) Using precise economical language explain Fred’s most profitable decision.

(b) Fred is told he can hire a competent farm manager for $70,000 to run the farm for him. Will this change his decision?

Suppose the fast food industry in Melbourne is competitive. At the moment, there are 1000 fast food outlets in Melbourne operating at their long-run equilibrium level of output. The mayor decides to restrict the number of outlets to 800 (due to health concerns). Explain the effect this action will have on the market and on the individual firms still operating.

Answer 1

He can produce 240, 000 worth of crop, but he has to spend 60,000 to make it. So that's 180,000 in net profit.

By renting land from his neighbor for 120,000, he only makes 100,000 using it. So he's losing 20,000 by using his neighbor's land. (120,000 -100,000)

The first option he gets to keep 180,000

while the second he loses 20,000.

Part B asks him to spend 70,000 for someone to do it for him. In either case he would lose money so I don't think he would change his mind unless he wanted to spend his time doing something else?