The demand curve of a monopolistically competitive firm
A) is downward-sloping because it must cut its price to sell more.
B) is horizontal because the firm must cut its price to sell more.
C) is perfectly elastic.
D) is downward-sloping because it sells an identical product.
Question 2
Marv Pilson has 50 worth of groceries in a shopping cart at his local Shop 'n Save. Assume that the marginal utility per dollar of the liter bottles of soft drink in Marv's cart equals 50.
The marginal utility per dollar of the boxes of cereal in Marv's cart equals 20. Marv has only 50 to spend, but has not yet paid for his groceries. How can Marv increase his total utility without spending more than 50?
A) Marv should buy fewer boxes of cereal and fewer bottles of soft drink. He can then spend more on other items.
B) Marv should substitute his favorite soft drink or the cereal in his cart for generic brands that have lower prices.
C) Marv should buy more boxes of cereal and fewer bottles of soft drink.
D) Marv should buy fewer boxes of cereal and more bottles of soft drink.
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