Suppose people are in consumer equilibrium buying 10,000 units of good X at a given price. Then the price of good X falls to $0. It follows that people will buy more of good X and that the marginal utility of the last additional unit they buy will be __________ the __________ of the 10,000th unit.
A)lower than; marginal utility
B)greater than; average utility
C)the same as; marginal utility
D)greater than; marginal utility
E)none of the above

Question

Quizplus · Accepted Answer

When the price of good X falls to $0, people will buy more of it, leading to a decrease in the marginal utility of the additional units due to the law of diminishing marginal utility. Thus, the marginal utility of the last additional unit will be lower than the marginal utility of the 10,000th unit.

Suppose People Are in Consumer Equilibrium Buying 10,000 Units of Good