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Determine the cost to the government of buying firms

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Consider a market where supply and demand are given by QXS = -14 + PX and QXd = 85 - 2PX. Suppose the government imposes a price floor of $38, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $38 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 $38 price floor.

Reference no: EM132482184

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