There are three types of barber shops in a competitive market in Seattle. Due to the peculiarities of zoning in Seattle, shop space can be rented in only three sizes: 1000 square feet, 2000 square feet, and 3000 square feet. For each of the W footages, the information below shows the number of haircuts that can be sold as you increase the number of full-time barbers. The Barbers Union requires you to hire people full-time or not at all. (In other words, these are the only choices for workers and the barber shops.) For every 1000 square feet of space you rent, the annual rent is $40 per square @ and you must sign a one-year lease. The annual wage for a full-time barber is $30,000. These represent all economic costs including the normal prot. 1000 sq. ft. 2000 sq. ft. 3000 sq. ft. Number Number Number Number Number Number of of of of of of Barbers Haircuts Barbers Haircuts Barbers Haircuts 0 0 0 0 0 0 1 4000 1 4920 1 5560 2 6080 2 7480 2 7720 3 7720 3 9480 3 10520 4 8600 4 10520 4 12760 5 9320 5 11440 5 14640 6 9960 6 12240 6 16280 7 10520 7 12920 7 16400 Read the lecture notes for week three on returns to scale and remember the definition of a marginal product of an input is the change in output divided by the change in the input, holding other factors constant. a. Given the wage and rental information above, for each square footage what is the short-run average total cost of producing 10520 haircuts? [Remember that short-run average total cost includes both average variable and average xed costs.] The long run average cost for a level of output is the lowest short run average total cost at which you can produce that output. What is the long-run average total cost of producing 10520 haircuts? Explain in words why you chose each answer. (4 points) Short run average total cost of 10520 with 1000 sq. ft? Short run average total cost of 10520 with 2000 sq. ft? Short run average total cost of 10520 with 3000 sq. ft? Long run average total cost of 10520 % Explanation for why you chose this Long run average total cost: For shops with each square footage, determine for each number of barbers listed, the total variable cost, total fixed cost, total cost, average variable cost, average total cost, average fixed cost, and marginal cost. (4 points} Paste from Spreadsheet The leases for the year have all been signed and the market price is $18. What is the profit-maximizing number of barbers to hire for the shops at each square footage? What prots are earned in the barber shops with each square footage? Explain your choice. (8 points) Optimal workers for 1000 square feet: Optimal workers for 2000 square feet: Optimal workers for 3000 square feet: Maximum profit for 1000 square feet: Maximum Profit for 2000 square feet: Maximum Profit for 3000 square feet: Explanation for choices: Consider the long run situation in the market where there is strong price competition, barber shops can change the square footage in their shop, and barber shops enter and exit the market. What do you anticipate will be the price in the long run? Based on that price, what will be the shop's optimal choice of shop size and number of barbers in the shop in the long run? Explain your logic. (4 points) Net Price in Long Run equilibrium Prot maximizing square footage in Long run equilibrium Prot maximizing number of workers in long run gggil'mg'gg . Explanation for your choices