Consider a market where supply and demand are given by Q X S = -16 + P X and Q X d = 92 – 2P X… 1 answer below »

Consider a market where supply and demand are given by Q
X
S = -16 + P
X and Q
X
d = 92 – 2P
X. 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.