A firm with market power has estimated the following demand function for its product: Q = 12,000 - 4,000P, where P = price per unit and Q = quantity demanded per year. The firm's total annual costs are $4,000 when nothing is being produced. These costs increase by 50 cents for each unit produced.

a) What equation reflects the firm's total cost function?

b) What equation reflects the firm's marginal cost function? 3 c) Assuming the firm's objective is to maximize profit, determine:

The quantity of output it should produce

The price it should charge

The annual profit it will make

d) Given the price calculated in (c), what is the markup over AVC at the optimal production level?

e) If the price elasticity of the firm's product is -1.4, calculate the optimal price to charge using the Mark-up Pricing Formula?