Maxine has a fixed income per month to spend on goods and services, so in allocating her limited income over a set of goods, she should purchase the goods that _____.
A. have the highest utility regardless of price
B. have the highest marginal utility
C. provide the most utility per dollar spent
D. have equal marginal utilities
Marginal utility is the extra units of utility derived from consuming additional units of a good. When total utility is maximum, marginal utility is zero, and after that, marginal utility starts falling. It gives an inverted U-shaped total utility curve.
Answer and Explanation: 1
When there is a budget constraint, a consumer spends on those goods where the indifference curve is tangent with the budget line. It is the point...
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fromChapter 3 / Lesson 10
Learn about marginal utility and how it is calculated. Explore the basics of marginal utility, the marginal utility equation, and how it is applicable in economics.