Solution

Let's write down the initial parameters of the air inside the cylinder:

1. Initial volume: $V_1 = 50 \text{ L}$
2. Initial pressure: $P_1 = 10 \text{ MPa} = 10^7 \text{ Pa}$
3. Initial temperature: $T_1 = 27^\circ\text{C} = 300 \text{ K}$

After the air is released into the ballast tank at a depth $h = 40 \text{ m}$, it reaches a new state. The external pressure at this depth consists of the atmospheric pressure $P_{\text{atm}}$ and the hydrostatic pressure of the water:
$$P_2 = P_{\text{atm}} + \rho gh$$
where $\rho = 10^3 \text{ kg/m}^3$ is the density of water, and we take standard atmospheric pressure as $P_{\text{atm}} \approx 10^5 \text{ Pa}$.
The final temperature of the air after expansion is $T_2 = 3^\circ\text{C} = 276 \text{ K}$.

Since the mass of the air remains constant, we can apply the combined gas law:
$$\frac{P_1 V_1}{T_1} = \frac{P_2 V_2}{T_2}$$

From this, we can express the final total volume $V_2$ occupied by the air:
$$V_2 = \frac{P_1 V_1 T_2}{T_1 P_2}$$
$$V_2 = \frac{P_1 V_1 T_2}{T_1 (P_{\text{atm}} + \rho gh)}$$

Note on the displaced volume

The total volume of the air after expansion is $V_2$. However, the cylinder itself already holds a volume $V_1$. The volume of water actually displaced from the tank is only the "additional" volume the gas takes up as it leaves the cylinder. Therefore, the displaced volume of water $\Delta V$ is the difference between the final and initial gas volumes.

$$\Delta V = V_2 - V_1 = \frac{P_1 V_1 T_2}{T_1 (P_{\text{atm}} + \rho gh)} - V_1$$

Let's substitute the numerical values into the equation. For convenience, we can keep $V_1$ in liters, which will give us the result for $\Delta V$ directly in liters:
$$\Delta V = \frac{10^7 \cdot 50 \cdot 276}{300 \cdot (10^5 + 10^3 \cdot 9.8 \cdot 40)} - 50 = 885 \text{ L}$$