5. QT Corp, an appliance firm, is currently selling 750 kettles per month and its total costs are£21,000 per month. It i

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5. QT Corp, an appliance firm, is currently selling 750 kettlesper month and its total costs are£21,000 per month. It is currentlycharging a price of £30, but this has recently been reduced from£35, because sales were only reaching 550 units per month. Theincrease in sales has also increased costs by £4,000 per month. Thefirm has estimated that it has a linear total cost function andthat its price elasticity of demand is constant.
a) Calculate the price elasticity of demand at the currentprice.
b) Derive the demand and cost functions for the firm.
c) Calculate the optimal markup for the firm, and itsprofit-maximizing price and output.
d) Calculate the amount of profit that the firm is currentlyforegoing.
e) Comment on the firm’s current strategy.