Question

The law of diminishing marginal utility states that:

a) Marginal utility increases as consumption increases.
b) Marginal utility decreases as consumption increases.
c) Marginal utility remains constant regardless of consumption.
d) Marginal utility is unrelated to the quantity consumed.

Answer 1

The correct answer to the student's question is b) Marginal utility decreases as consumption increases, which is exemplified by José receiving less utility from each additional T-shirt he consumes.

Step-by-step explanation:

The law of diminishing marginal utility states that as a person consumes more units of a good or service, the utility gained from each additional unit tends to decrease. For instance, if José's first T-shirt gives him a satisfaction of 22 utils, by the time he picks his fourth T-shirt, which he uses less frequently, this may provide only 18 utils of satisfaction. This decrease in utility with each additional unit consumed reaffirms choice b) as the correct answer: Marginal utility decreases as consumption increases.