investment banking analysts and MBA students. There are currently 1000 analysts and 1000 students looking to rent.

The complex will have two types of apartments, \Hip" apartments and \Budget" apartments.

The long-run monthly marginal cost (including land and amortized construction costs) of a Hip

apartment is $1000 per month, while the long-run monthly marginal cost of a Budget apartment

is $800. Market research tells you that banking analysts are willing to pay $3000 per month for

a budget apartment and $5000 per month for a hip apartment. It also indicates that students

are willing to pay $2400 per month for a budget apartment and $3200 per month for a hip

apartment. The developer is unable to observe the true identity of these renters and cannot

charge them different prices for the same apartment.

How many of each type of apartment should the developer build and what prices should the

developer set? What are the company's monthly prots? Please be sure to explain your answers.