A consumer's marginal utility () for the first three consecutive glasses of fruit juice consumed is utils, utils, and utils respectively. If consuming the glass brings total utility () to utils, and the consumer reaches the satiety point at the glass where total utility is maximized at utils (with for the glass also equal to utils), which of the following correctly identifies the unit at which the Law of Diminishing Marginal Utility first sets in, the of the glass, and the at the satiety point?
- 3rd glass, utils, and utilsAnswer
- B2nd glass, utils, and utils
- C3rd glass, utils, and utils
- D4th glass, utils, and utils
Answer
The Law of Diminishing Marginal Utility first sets in at the 3rd glass, the marginal utility of the 4th glass is utils, and the marginal utility at the satiety point is utils.
The correct response accurately applies the principles of cardinal utility theory. First, diminishing marginal utility begins when marginal satisfaction starts decreasing; since , , and , the decrease begins at the 3rd glass. Second, total utility after 3 glasses is utils; subtracting this from utils yields utils. Third, the satiety point occurs where total utility reaches its peak ( utils), corresponding to utils.
Step-by-Step Solution
Key Concept
Law of Diminishing Marginal Utility and Total Utility Relationship
Estimated Time:2m 0s