Question

Tom is a farmer specializing in growing pumpkins. He competes in a perfectly competitive market. For each for the following scenarios, draw and label an appropriate graph (including appropriate curves and profit maximizing output) and include a brief explanation saying why your graph correctly demonstrates the scenario.

1) In 2008 Tom earned a profit.
Graph Explanation















2) In 2009 Tom earned a loss, but continued to farm.
Graph Explanation


















3) In 2010 Tom earned a loss, and decided to shut down his farm.
Graph Explanation

Answer 1

1) The graph line would demonstrate an increase because Tom earned a PROFIT meaning he gained money.
2)The graph would decrease by the amount of money he lost, and take in mind that he KEPT on farming so he loses more money.
3) The graph would just sit on zero, he earned another loss so the graph decreases. He then decides to shut it down so he loses all his money and the line just plummets down to zero.
HOPE THIS HELPS!!!!