FIGURE 6- 1
-Refer to Figure 6- 1. Total utility is at its maximum when marginal utility is
A) at the maximum.
B) equal to total utility.
C) negative.
D) positive.
E) equal to zero.

Question

FIGURE 6- 1
-Refer to Figure 6- 1. Total utility is at its maximum when marginal utility is
A) at the maximum. 
B) equal to total utility. 
C) negative. 
D) positive. 
E) equal to zero.

Quizplus · Accepted Answer

According to the law of diminishing marginal utility, as a consumer consumes more and more of a good, the marginal utility derived from each additional unit of the good decreases. Eventually, the marginal utility may even become negative. Total utility, on the other hand, increases as the consumer consumes more of the good until a certain point, after which it starts to decrease. This point is where marginal utility equals zero. Therefore, the best choice is E, where total utility is at its maximum. Any consumption beyond this point would result in a decrease in total utility.

FIGURE 6- 1 -Refer to Figure 6- 1. Total Utility Is at Its