Problem 1. The Los Angeles Airport Commission has decided to sell the right to operate a coffee bar at the United Terminal. Starbucks and Coffee Bean are both interested in bidding for this exclusive right. For Starbucks, the annual demand for coffee drinks is: Q? = 500, 000 220, 000.133 (where P3 is the price of a cup of Starbucks coffee expressed in dollars) For Starbucks, the long run total cost function (in costs per year) is: TCS = $50,000 + $0.6QS For Coffee Bean, the annual demand for coffee is: QC = 400, 000 200,000Pc (where Pr: is the price of a cup of Coffee Bean's coffee expressed in dollars) For Coffee Bean, the long run total cost function (in costs per year) is: TCC = $60,000 + $0. 6Qc Assume that coffee is the only item being sold. a) Are there economies of scale for the Starbucks and Coffee Bean shops? Explain briey! b} What is the optimal price for each of the two operators? Show your work! c) What is the maximum annual amount that the Airport Commission can get for this franchise? Show your work! d} If there was an auction, and Starbucks knew about Coffee Bean's demand and cost structure, how much should Starbucks optimally bid for the right to operate at the United Terminal at LAX