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Author Question: Monopolistically competitive firms constantly develop new products in an effort to A) make the ... (Read 39 times)

luvbio

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on: Jun 29, 2018
Monopolistically competitive firms constantly develop new products in an effort to
 
  A) make the demand for their product more elastic.
  B) increase the demand for their product.
  C) increase the marginal cost of their product.
  D) None of the above are correct.

Question 2

For a consumer, the marginal utility of good A is 25 and its price is 5. The marginal utility of good B is 60 and its price is 12. The consumer has allocated his entire budget. Is this consumer maximizing his total utility? Explain your answer.
 
  What will be an ideal response?


scikid

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Reply #1 on: Jun 29, 2018
Answer to Question 1

B

Answer to Question 2

Yes, the consumer is maximizing his utility. He has allocated his entire budget and he is consuming the combination of goods A and B such that the marginal utility per dollar from each is the same.


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