Suppose market demand and supply are given by Q^d = 100 - 2P and Q^S = 5 + 3P. If the government sets a price floor of $30 and agrees to purchase all surplus at $30 per unit, the total cost to the government will be:

Question

Quizplus · Accepted Answer

At a price floor of $30, Q^d = 100 - 2(30) = 40 and Q^S = 5 + 3(30) = 95. The surplus is 95 - 40 = 55 units. The government buys 55 units at $30 each, costing 55 * 30 = $1,650.

Suppose Market Demand and Supply Are Given by Qd =

Suppose Market Demand and Supply Are Given by Q^d =