WBCS.LIVE practice question

According to the Law of Diminishing Marginal Utility, as consumption of a good continuously increases, what happens to total utility?

Solve this multiple-choice question and check the correct answer with its explanation below.

Answer options

  1. Total utility increases at an increasing rate.
  2. Total utility decreases initially and then increases.
  3. Total utility increases at a decreasing rate.
  4. Total utility remains constant.

Correct answer and explanation

Correct answer: Total utility increases at a decreasing rate.

Explanation: āœ… Correct Answer: C) Total utility increases at a decreasing rate. šŸ“š Explanation: The Law of Diminishing Marginal Utility states that as a consumer consumes more units of a specific good, the additional satisfaction derived from each extra unit decreases. While the marginal utility continuously drops, the total utility continues to increase, but it does so at a strictly decreasing rate. Total utility reaches its absolute maximum point precisely when marginal utility becomes exactly zero.