Let us consider a company producing a good Z, on a perfectly competitive market.

The expression for the total cost of this enterprise is:

C(q)=72+2q2

Issue 1:

If the market price is $20 per unit, indicate the level of production such that this firm's profit is maximum in the short run. Justify your calculations.

Issue 2:

If the market price is $20, is the business making a profit or a loss? Also indicate the amount of profit or loss.

Issue 3:

In the long term, will there be more or fewer firms? Explain