Maximum total utility is achieved where:
A) Total revenue equals zero.
B) The price elasticity of demand is 1.0.
C) Marginal utility equals zero.
D) Marginal revenue equals zero.

Question

Quizplus · Accepted Answer

Maximum total utility is achieved when the consumer is allocating their income in such a way that the marginal utility per dollar is equal across all goods. This occurs when the marginal utility of the last unit purchased of all goods is equal and diminishing. At this point, any further allocation of income would result in a decrease in overall utility. Therefore, the point at which marginal utility equals zero is the optimal point for maximizing total utility.

Maximum Total Utility Is Achieved Where