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XL Corp has estimated its demand and cost functions to be as follows: P = 60 - 0.2Q TC = 200 + 4Q + 1.2Q
XL Corp has estimated its demand and cost functions to be as follows:
P = 60 - 0.2Q
TC = 200 + 4Q + 1.2Q2
where Q is in units, P is in $ and C is in $.
- Calculate the profit-maximizing price and output for the firm
- Calculate the size of the profit.
- Illustrate your answer using the appropriate graph
- Does the firm operate in the short run or in the long run? Why?
- Describe the factors that drive profits to zero in perfectly competitive markets in the long run. Critically explain the incentives that drive the market to a long run equilibrium
- When do firms decide to shut down production in the short run? Illustrate your answer using graphs
- When do firms decide to shut down production in the short run? Illustrate your answer using graph.
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