Question

Which of the following statements is correct?

A. When marginal utility is decreasing, an increase in the quantity consumed will decrease total utility
B. When marginal utility is positive, an increase in the quantity consumed will decrease total utility
C. When marginal utility is positive, an increase in the quantity consumed will increase total utility
D. When marginal utility is zero, an increase in the quantity consumed will make total utility zero

Answer 1

The correct statement is C, where the total utility increases as long as the marginal utility is positive, although each additional unit consumed adds less to the total utility due to the law of diminishing marginal utility.

Step-by-step explanation:

The correct statement regarding marginal utility is: C. When marginal utility is positive, an increase in the quantity consumed will increase total utility. This is because the concept of marginal utility refers to the additional satisfaction or utility that a consumer gains from consuming one more unit of a good or service. As long as the marginal utility is positive, each additional unit consumed adds to the total utility. However, due to the law of diminishing marginal utility, the increase in utility tends to be smaller with each additional unit consumed. This means that while total utility continues to rise, it does so at a decreasing rate.

For instance, as José buys more T-shirts, each successive shirt gives him less satisfaction than the previous one. Initially, each T-shirt may contribute significant utility, but as he purchases more, the utility from each new T-shirt diminishes. As long as the utility from each additional T-shirt is greater than zero, José's total utility from T-shirts increases.