The market structure of the local boat industry is best characterized by monopolistic competition. Firm ABC is one of the producers in the local market. The demand for ABC's boats is given by Q D = 5 000 - P and the ABC's marginal cost function is MC ( Q ) = 1 000 + 2 Q .

a) Determine ABC's profit maximizing level of output and the price charged to customers.

b) Suppose the market is in LR equilibrium. Then what will be the fixed cost incurred by ABC?