Final answer:
Diminishing marginal utility of wealth indicates that a person gets less satisfaction from each additional unit of wealth, pointing to a concave utility function. Each subsequent unit of wealth provides less incremental happiness, as illustrated by the example of utility derived from additional T-shirts, confirming the utility function's concave nature.
Step-by-step explanation:
The diminishing marginal utility of wealth implies that the more wealth a person accumulates, the less utility (satisfaction or happiness) each additional unit of wealth will provide. This concept suggests that each additional unit of wealth has less impact on an individual's overall happiness or satisfaction than the previous one.
If we translate this into the utility function, we can say the utility function is concave as it reflects the law of diminishing marginal utility. A concave utility function is one where the slope (marginal utility) decreases as the quantity of the good increases.
For instance, José's first T-shirt provides him with a considerable amount of utility (22 utils), whereas the fourth one, which he only wears when his other clothes are in the wash, provides him with less additional utility (18 utils).
This decrease in additional satisfaction with each extra T-shirt is a classic demonstration of diminishing marginal utility. Therefore, the correct answer to the question is (B) Concave.