Consider a market where supply and demand are given by QXs = -18 + Px and QXd = 84 – 2Px. Suppose the government imposes a price floor of $39, and agrees to purchase and discard any and all units consumers do not buy at the floor price of $39 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 $39 price floor.