Final answer:
The statement is false because lowering a product's price increases the marginal utility per dollar, not the marginal utility itself. A lower price affects the income effect, not the utility derived from an additional unit of the product. The quantity demanded increase also depends on individual preferences and substitution effects. The correct answer is option b.
Step-by-step explanation:
Lowering the price of a product does not directly increase the product's marginal utility for buyers, which is the additional utility provided by one additional unit of consumption. What actually happens is that lowering the price increases the marginal utility per dollar, which is the additional satisfaction gained from purchasing a good given the price of the product; this is calculated as MU/Price. Therefore, the statement is false. Lowering a product's price affects the income effect, causing the opportunity set to shift to the right, consequently making the product more attractive to buyers and potentially increasing the quantity demanded based on personal preferences.
The income effect occurs when a change in the price of a good alters consumers' real income; a higher price reduces the buying power as if the income has been reduced, causing a leftward shift in the budget constraint. Conversely, a lower price increases real buying power, shifting the opportunity set rightward and increasing utility levels. So, while less expensive goods may lead to more purchases and increased overall utility, the exact increase of quantity demanded depends on individual preferences and the substitution effect as well.