Phone data plans often charge a high price for the first 10 megabytes, a lower price for the next 100 megabytes, and a very low price for the next 1,000 megabytes. An economist would say this is because
A) not many people have cell phones these days.
B) marginal benefits decrease as you use more megabytes.
C) marginal benefits always decrease as circumstances change.
D) 1,000 megabytes can be transmitted more cheaply than 100 megabytes.
E) total benefits decrease as you use more megabytes.

Question

Quizplus · Accepted Answer

This pricing structure is based on the concept of marginal utility, which states that as we consume more of a good or service, the additional benefit derived from each additional unit decreases. In this case, the first 10 megabytes may provide a significant benefit to the consumer, hence they are charged a high price. However, as the consumer uses more data, the marginal benefit they derive from each additional unit decreases, hence the lower prices for the next 100 and 1,000 megabytes.

Phone Data Plans Often Charge a High Price for the First