Consider a monopolistically competitive industry populated by n firms. Consumers have Constant Elasticity of Subsitution (C.E.S.) preferences over these goods. That is, their utility function takes the form =(=11)1 U = ( i = 1 n c i 1 ) 1 , where the parameter , the elasticity of substitution between varieties, is strictly greater than 1 (i.e. >1 > 1 ). Which of the following statements is TRUE: Question 3 Answer a. The higher is, the lower the mark-up above the marginal cost that firms can charge b. The higher is, the higher the mark-up above the marginal cost that firms can charge c. Each firm acts in a fully independent way of all the other firms in the industry because they are the sole monopolist producing a specific variety d. A higher results in a higher income elasticity of demand e. A higher results in firms' demand curves being more inelastic