Figure 27-5.The figure shows a utility function for Dexter.
-Refer to Figure 27-5.From the appearance of the graph,we know that
A)Dexter's level of satisfaction increases by more when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001.
B)Dexter's level of satisfaction increases by less when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001.
C)Dexter's level of satisfaction increases by the same amount when his wealth increases from $1,001 to $1,002 as it does when his wealth increases from $1,000 to $1,001.
D)None of the above answers can be inferred from the appearance of the utility function.

Question

Figure 27-5.The figure shows a utility function for Dexter. 
-Refer to Figure 27-5.From the appearance of the graph,we know that
A)Dexter's level of satisfaction increases by more when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001. 
B)Dexter's level of satisfaction increases by less when his wealth increases from $1,001 to $1,002 than it does when his wealth increases from $1,000 to $1,001. 
C)Dexter's level of satisfaction increases by the same amount when his wealth increases from $1,001 to $1,002 as it does when his wealth increases from $1,000 to $1,001. 
D)None of the above answers can be inferred from the appearance of the utility function.

Quizplus · Accepted Answer

The graph shows that the slope of the utility function is decreasing, which means that the increase in satisfaction from an additional dollar of wealth is getting smaller as wealth increases. Therefore, the increase in satisfaction from an additional dollar of wealth when wealth increases from $1,001 to $1,002 is less than the increase in satisfaction from an additional dollar of wealth when wealth increases from $1,000 to $1,001.