1. Costs and optimization [32 POINTS] Consider a bakery that makes loaves of bread, and it has three different sites where it can produce them. The marginal costs of the three sites are: MCI(B) = 10, M02(B) = B and M03 (B) = 23 where B denotes loaves of bread. The bread is sold in a perfectly competitive market at a price p3. The bakery wants to maximize its prots. 0 a. Suppose that the bakery is obligated to produce 10 loaves of bread, but it can only choose one site. Which one would it choose? How would your answer change if it had to produce 25 loaves? [3 points] 0 b. Suppose that at some point, the bakery is producing 10 loaves in site #1, 11 loaves in #2 and 10 loaves in #3. If it wants to produce an additional loaf, which site should be used? [3 points] 0 0. Suppose the rms needs to produce 18 loaves of bread, and can only choose sites 1 and 2 because site 3 is being remodeled. How would it allocate production between the two sites? Justify your answer. [6 points] 0 d. How does your answer to part c. change if all three sites are available? [3 points] 0 e. If p3 = 8, how many loaves of bread will the bakery produce and how will the loaves be allocated across the sites? [5 points] a f: Assume that p3 = 8 and the xed cost for the bakery (rent for the sites etc.) is 50. Should the bakery be operating in the short run? Long run? (Hint: In PSZ, we learned that we can use marginal cost to calculate total cost once we know xed cost.) [8 points] 0 g. How would your answer to part e. change if p3 = 11? Is the conclusion odd? Explain. [4 points]