Consider a market where supply and demand are given by QXS = -16 + PX and 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. *****Please note I submitted this question before and the answer for part b was incorrect. The deadweight is not $48.
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