If the marginal utility of each good consumers buy does not diminish but remains constant, we should witness consumers:
A) buying no goods at all.
B) spending all of their income on the good with the highest MU.
C) buying one of each good.
D) buying only the least expensive goods.

Question

Quizplus · Accepted Answer

If the marginal utility (MU) of each good remains constant, consumers will spend all of their income on the good with the highest MU to maximize their total utility. This is because, without diminishing marginal utility, there is no incentive to diversify purchases for utility maximization.

If the Marginal Utility of Each Good Consumers Buy Does