Consider a market where supply and demand are given by QXs = -18 + Px and QXd = 84 – 2Px.

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.

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