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Suppose that the shopping center developer charges a rent equal to each store's gross prot. leaving the store with a net prot of exactly zero.

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Suppose that the shopping center developer charges a rent equal to each store's gross prot. leaving the store with a net prot of exactly zero. Total rent from the shopping center is then equal to the total gross prot of all its stores. The develgmrs pmt E thus I | r II in n rmin h rvi in W {that is. total rent minus the cost of providing space}. Finally. suppose that due to high-quality construction and the need to provide common space around the stores. the construction cost for shopping center space is high. In particular. suppose that the cost per period per square foot of store oor space is $1u. (a) Give an intuitive explanation for the pattern of incremental prots from the presence of other stores in the second table above. (a) Suppose the developer were to construct a single-store shopping center (a contradiction in terms. perhaps}. There are four types of such centers [a Department Store alone. a Toy Store alone. etc). Using the information above. compute the developers prot from each of these four types of centers. to) Next compute the developer's prot from the various types of two-store shopping centers (i.e.. Department Store plus Shoe Store. Department Store plus Toy Store. etc.; how many possibilities are there?) [d] Finally. compute developer prots from the various types of three-store centers and from the single type of four-store center. [e] Comparing your answers from (h), {c}. and {d}, identifyr the optimal shopping center (the one yielding the highest prot to the developer}. Explain intuitively why this particular collection of stores is optimal

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