Final answer:
Utility values must be nonnegative and increase as the payoff improves. It is not confined to a certain numerical range but reflects the satisfaction from consuming goods and services, with utility maximization often considered in terms of marginal utility per dollar.
Step-by-step explanation:
The question of what values utility must possess is fundamental in economics, particularly when discussing how consumers make decisions. There is a misconception that utility values must fall within a specific numeric range, such as between 0 and 1, or 0 and 10. In truth, utility must adhere to option c, meaning the values must be nonnegative.
Utility is a measure of the satisfaction or happiness a consumer derives from consuming goods and services. Since utility measures personal satisfaction, it need not be confined to any upper limit but should not be negative, as consuming goods and services is presumed to at least not decrease satisfaction.
Furthermore, utility values must follow option d; they must increase as the payoff improves. This concept is tied to the principle that more consumption generally leads to greater satisfaction up to a certain point. To maximize utility on a consumption budget constraint, we look at the marginal utility per dollar—the additional satisfaction per dollar spent on an item. For example, if an item costing $5 yields 10 utils, this indicates a rate of 2 utils per dollar, which guides the consumer's decision-making process.