Suppose there are only two goods Food (F) and Shelter (S). The ...

[Melani1276]

Suppose there are only two goods  Food (F) and Shelter (S). The demand equations for these two goods depend on their prices, pF and pS as follows:
 
  DF (pF, pS) = 10  2pF  pS
   DS (pF, pS) = 10  pF  2pS
  The supply curves depend only on their own prices:
   SF (pF) = pF
   SS (pS) = 5pS
  Determine the equilibrium price and quantity of these goods.

Question 2

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, then
 
  A) consumer surplus is larger than under single-price monopoly.
  B) social welfare is larger than under perfect competition.
  C) the monopoly's profits are larger than under single-price monopoly.
  D) the monopoly's profits are larger than under perfect price discrimination.

[Sweetkitty24130]

Answer to Question 1

The two equations describing the equilibrium in each market are given by:
pF = 10  2pF  pS
5pS = 10  pF  2pS
Using the first equation, we can solve for pS in terms of pF:
pS = 10  3pF
Substituting this into the second equilibrium condition for pS yields:
7(10  3pF) = 10  pF
Solving for pF = 3.0. Then pS =1.0. The quantities are QF = 3 and QS = 5. Notice that while the demand equations are symmetrical, the higher supply of Shelter results in a lower price and higher quantity in equilibrium.

Answer to Question 2

C

[Melani1276]

Excellent

[fatboyy09]

Thanks for the timely response, appreciate it