E202PracticeExam2.10 - c. Calculate and graph the total...

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c. Calculate and graph the total economic surplus lost as a result of the price ceiling. Answer : 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) (5,000) = $37,500/semester. d. Suggest an alternative policy for helping students acquire textbooks. Answer : Coupons, vouchers, subsidies, pure monetary transfers, lowering tuition, etc. Chapter 8 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: Labor $1,700 Electricity 100 Rent 3,300 Interest on loan for equipment 900 a. Calculate Bert’s monthly accounting profit. Answer : 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.
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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