Valley produces bicycles and is currently selling 260 per month of a particular model. Its total costs are 90,000 per month. It is currently charging a price of 500, but this has recently been reduced from 560, because sales were only reaching 225 units per month. The increase in sales has also increased costs by 10,500 per month. The firm has estimated that it has a linear total cost function and that its price elasticity of demand is constant..

B)Derive the demand and cost functions for the firm.

C)Calculate the optimal markup for the firm, and its profit-maximizing price and output.