Determine the cost to the government of buying firms units

Reference no: EM13222031

Consider a market where supply and demand are given Qx^s=-10 +Px
and Qx^d= 56-2Px. Suppose the government imposes a price floor of $25, and agrees to purchase any and all units concumers do not buy at the floor price of $235 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 $25 price floor.

Reference no: EM13222031

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