Use the following to answer question:
-(Table: The Total Utility of Income After College Expenses)Use Table: The Total Utility of Income After College Expenses.The Smith family has _____ marginal utility as income increases.The marginal utility of income between $32,500 and $35,000 is _____ utils per dollar,while it is _____ utils per dollar between $45,000 and $47,500.
A)increasing;0.48;0.64
B)increasing;0.12;0.36
C)diminishing;0.28;0.08
D)diminishing;0.40;0.10

Question

Use the following to answer question: 
-(Table: The Total Utility of Income After College Expenses)Use Table: The Total Utility of Income After College Expenses.The Smith family has _____ marginal utility as income increases.The marginal utility of income between $32,500 and $35,000 is _____ utils per dollar,while it is _____ utils per dollar between $45,000 and $47,500.
A)increasing;0.48;0.64 
B)increasing;0.12;0.36 
C)diminishing;0.28;0.08 
D)diminishing;0.40;0.10

Quizplus · Accepted Answer

The table shows that as income increases, the marginal utility decreases. This is consistent with the law of diminishing marginal utility. Therefore, the Smith family has diminishing marginal utility as income increases. The marginal utility of income is calculated as the change in total utility divided by the change in income. Between $32,500 and $35,000, total utility increases by 14 and income increases by 2.5, so the marginal utility of income is 14/2.5 = 0.28 utils per dollar. Between $45,000 and $47,500, total utility increases by 9 and income increases by 2.5, so the marginal utility of income is 9/2.5 = 0.08 utils per dollar. Therefore, the marginal utility of income is higher between $32,500 and $35,000 than between $45,000 and $47,500, which means that choice C is the correct answer.

Use the Following to Answer Question