PART B: Problems and Application of Concepts (65 points} 1) Firm in a competitive market (20 points} Richard was awarded a CFC in interior design and he is ready to start his business consisting in visiting clients at their place to provide interior design advice. This service is a perfectly competitive industry. To provide this service, Richard needs to buy some material and equipment for a total cost of CHF 48000. These materials and equipment last one year and after that, new ones need to be bought. Richard plans to work 11 months per year. He needs to decide how many clients he should work with per month. The variable cost increases with the number of clients he has per month because of logistics, transportation and the stress of having more clients. The following table represents his costs. Number of clients per Fixed Cost Variable Cost Total Costs ATC AVC MC month 0 0 ----- P 200 N 500 W 1200 2100 3000 6 4100 5300 8 8000 Where ATC is average total cost, AVC is average variable cost and MC is marginal cost. a. Complete in the table above the fixed cost, the total cost, the ATC, the AVC, and the MC (5 points) b. If the market price for this service is CHF 1'600 per client per month, how many clients Richard should have per month if he wants to maximize his profits? Why? (4 points)c. How much are Richard's prot per year? (4 points) d. Given your answer in c, should Richard stay open, close right now or close in the long run? Justify your answer (3 points) e. Would your answer in d change if Richard could alternatively work from home and make CHF 15'000 in profits per year? Justify your answer (4 points)