Frank Buys Only Milk and Cereal, Both of Which Are

question 156

Multiple Choice

Frank buys only milk and cereal, both of which are normal goods, and he always maximizes his utility. Frank's boss cuts Frank's pay by $200 per month. What happens to Frank's marginal rate of substitution between milk and cereal?

• A) It fluctuates randomly.
• B) It decreases.
• C) It increases.
• D) It stays constant.

---

Definitions:

Adequate Communication

Effective exchange of information, ensuring all involved parties fully understand terms, expectations, or instructions.

Reserve

Funds or resources set aside for specific future use or to cover unexpected liabilities, or the practice of conserving natural resources.

Auction

An auction is a public sale where goods or services are sold to the highest bidder.

Under Seal

A formal legal expression indicating that a document's signature has been affixed in a formal manner, typically making the document legally binding and more difficult to revoke.