Question

Consider a market where supply and demand are given by Qsx = - 16 + Px and Qdx = 92 - 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 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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  • CreatedApril 18, 2014
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