8. Tom's Farm grows tomatoes and operates in a constant-cost, perfectly competitive tomato industry. Tom'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 tomato market and Tom's Farm
that show the current situation. Be sure to label:
i. Market output and price, labeled as Qm and PM, respectively
ii. Tom's Farm output and price, labeled as Q and PF, respectively
All relevant cost curves
iv. Shade in the area of economic loss.
b. Should Tom's Farm shut down? Why or why not?
c. Explain what will happen to the industry in the long run.