Question
Sara's Strawberries is a perfectly competitive strawberry producer. The short-run price of strawberries is currently below average total cost, but above Sara's shut-down point. A.
Sara's Strawberries is a perfectly competitive strawberry producer. The short-run price of strawberries is currently below average total cost, but above Sara's shut-down point.
A. Using two correctly labeled graphs, show the strawberry market side-by-side with Sara's Strawberries. Clearly indicate which graph represents the market and which represents Sara's Strawberries. In your graphs, identify:
i. Price and quantity in the strawberry market.
ii. Price and quantity for Sara's Strawberries.
iii. The area of economic profit or loss for Sara's Strawberries.
B. In a new set of side-by-side graphs for both the market and Sara's Strawberries, show the long-run adjustment in each of the following:
i. Price and quantity in the strawberry market.
ii. Price and quantity for Sara's Strawberries.
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