Figure 27-3
The following figure shows a utility function for Dexter.
-Refer to Figure 27-3. 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)the change in Dexter's level of satisfaction is constant as wealth increases.

Question

Figure 27-3
The following figure shows a utility function for Dexter. 
-Refer to Figure 27-3. 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)the change in Dexter's level of satisfaction is constant as wealth increases.

Quizplus · Accepted Answer

The graph shows that the slope of the curve decreases as wealth increases, indicating that the increase in satisfaction from an additional dollar of wealth is smaller at higher levels of wealth. Therefore, the increase in satisfaction from an additional dollar of wealth is greater when wealth increases from $1,000 to $1,001 than when it increases from $1,001 to $1,002.

Figure 27-3 The Following Figure Shows a Utility Function for Dexter