QUESTION 2 Which of the following statements is true? If total utility is at a maximum,...

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Answer 1

Answer #1

Total utility is the total amount of satisfaction measured in utils that a person gets by consuming a particular amount of a good. Marginal utility is the addition to the total amount of satisfaction that results from the Consumption of one more unit of the good.

Analysing the relationship between total utility and the marginal utility, one can easily see that if the total utility is at a maximum, then marginal utility is zero. After that point of total Utility maximum, the marginal utility is negative and total utility decreases.

So, it is true that if total utility is at maximum, then marginal utility is zero.

Hence, first option is correct.

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