Did tomatofest suffer an economic loss

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Fierce storms in October 2004 caused TomatoFest Organic Heirlooms Farm to end its tomato harvest two weeks early. According to Gary Ibsen, a partner in this small business (Carolyn Said, "Tomatoes in Trouble," San Francisco Chronicle, October 29, 2004, C1, C2), TomatoFest lost about 20,000 pounds of tomatoes that would have sold for about $38,000; however, because he did not have to hire pickers and rent trucks during these two weeks, his net loss was about $20,000. In calculating the revenue loss, he used the post-storm price, which was double the pre-storm price.

a. Draw a diagram for a typical firm next to one for the market to show what happened as a result of the storm. Assume that TomatoFest's experience was typical of that of many small tomato farms.

b. Did TomatoFest suffer an economic loss? What extra information (if any) do you need to answer this question? How do you define "economic loss" in this situation?

Reference no: EM131345716

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