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Determine the cost to the government

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Consider a market where supply and demand are given by QXS = -16 + PX andQXd = 83 - 2PX. Suppose the government imposes a price floor of $40, and agrees to purchase any and all units consumers do not buy at the floor price of $40 perunit.

a. Determine the cost to the government of buying firms' unsold units.

b. Compute the lost social welfare (deadweight loss) that stemsfrom the $40 price floor.

Reference no: EM131381458

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