c. Calculate and
the total economic surplus lost as a result of the price ceiling.
: The total economic surplus lost due to the price ceiling is $1,350,000 - $1,312,500 =
$37,500/semester. It is the area between the demand and supply curves, and between the new
quantity exchanged and the equilibrium quantity. 0.5 ($65 - 50) (30,000 - 25,000) = 0.5 ($15)
d. Suggest an alternative policy for helping students acquire textbooks.
: Coupons, vouchers, subsidies, pure monetary transfers, lowering tuition, etc.
7. Bert Jones owns and operates a laundry whose monthly revenue is $9,000. Bert could earn
$4,000 a month elsewhere if he did not run the laundry. Monthly expenses are:
Interest on loan for equipment
a. Calculate Bert’s monthly accounting profit.
: Bert’s accounting profit is his revenue minus his explicit costs, 9,000 - 6,000 = $3,000.
b. Is the laundry making an economic profit? Should Bert stay in the laundry business? Explain.