called “The Clip Joint” in Figure 7.7. The data for output and costs are in Table 7.9. The fixed costs of operating

the barber shop, including the space and equipment, are $160 per day. The variable costs are the costs of

hiring barbers, which in our example is $80 per barber each day. The first two columns of the table show the

quantity of haircuts the barbershop can produce as it hires additional barbers. The third column shows the

fixed costs, which do not change regardless of the level of production. The fourth column shows the variable

costs at each level of output. We calculate these by taking the amount of labor hired and multiplying by the
168 7 • Production, Costs, and Industry Structure

wage. For example, two barbers cost: 2 × $80 = $160. Adding together the fixed costs in the third column and

the variable costs in the fourth column produces the total costs in the fifth column. For example, with two

barbers the total cost is: $160 + $160 = $320.
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