A 5. Strawberries are used to make strawberry pies. Sophia's Farm grows strawberries and
operates in a constant-cost, perfectly competitive strawberry industry. Sophia's Farm is
currently operating at an economic loss but at a point where the price is greater than the
average variable costs.
Draw correctly labeled side-by-side graphs for the strawberry market and
Sophia's Farm that show the current situation. Be sure to label:
Market output and price, labeled as Qm and PM, respectively
ii. Sophia's Farm output and price, labeled as QF and Po, respectively
iii. All relevant cost curves
IV. Shade in the area of economic loss.
b. As a result of a successful advertising campaign, the demand for strawberry pies
has increased. Draw what will happen on your graphs to market price and quantity
and the firm's output in the short run. Be sure to label:
i. New Market output and price, labeled as Qx and Px, respectively
Sophia's Farm's New output and price, labeled as Qy and Py, respectively