Homework Answers
Marginal utility refers to the satisfaction or utility received
from the consumption of one more unit of a good.
Following table shows the marginal utility schedule -
| Quantity | Total Utility | Marginal Utility |
| 1 | 10 | 10 |
| 2 | 15 | 5 |
| 3 | 18 | 3 |
| 4 | 21 | 3 |
| 5 | 25 | 4 |
The marginal utility of the 4th unit is 3.
Diminishing marginal returns happen when the marginal utility continuously declines as the consumption increases.
In given case, marginal utility is decreasing up to consumption of 3 units, after that, it has started increasing.
So,
This utility structure does not satisfy the diminishing marginal returns concept.
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