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Difficulty: EasyLaw of Diminishing Marginal Utility

Match each condition of Marginal Utility (MUMU) on the left with its corresponding effect on Total Utility (TUTU) on the right.

  • Marginal Utility is positive (MU>0MU > 0) and fallingTotal Utility increases at a decreasing rate
  • Marginal Utility is equal to zero (MU=0MU = 0)Total Utility reaches its maximum level (satiety point)
  • Marginal Utility becomes negative (MU<0MU < 0)Total Utility begins to decline

Answer

The correct matches are: Positive and falling Marginal Utility corresponds to Total Utility increasing at a decreasing rate; Marginal Utility equal to zero corresponds to Total Utility reaching its maximum level (satiety point); Negative Marginal Utility corresponds to Total Utility beginning to decline.
Under the Law of Diminishing Marginal Utility, as consumption increases, positive marginal utility means total utility continues to rise at a decreasing rate. At the point of satiety, marginal utility equals zero and total utility reaches its maximum. If consumption continues, marginal utility becomes negative and total utility begins to diminish.

Step-by-Step Solution

1
Examine the relationship between Marginal Utility (MUMU) and Total Utility (TUTU).
MUMU represents the rate of change of TUTU with respect to quantity consumed (MU=ΔTUΔQMU = \frac{\Delta TU}{\Delta Q}).
Understanding MUMU as the slope of TUTU clarifies how changes in MUMU dictate the behavior of TUTU.
2
Evaluate the behavior of Total Utility at key Marginal Utility thresholds (MU>0MU > 0, MU=0MU = 0, MU<0MU < 0).
As long as MU>0MU > 0, TUTU grows. When MU=0MU = 0, TUTU stops growing and attains maximum height. When MU<0MU < 0, TUTU drops.
This directly applies the Law of Diminishing Marginal Utility to consumer utility schedules.

Key Concept

Relationship between Total Utility and Marginal Utility under the Law of Diminishing Marginal Utility
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Topics

Law of Diminishing Marginal Utility

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