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Consider a market where supply and demand are given by Q X S = -16 + P X and Q X d = 92 -
Consider a market where supply and demand are given by QXS= -16 + PXand QXd= 92 - 2PX. Suppose the government imposes a price floor of $40, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $40 per unit.
a. Determine the cost to the government of buying firms' unsold units.
$
b. Compute the lost social welfare (deadweight loss) that stems from the $40 price floor.
$
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