Elaine values the utility of her first cup of coffee at $1; a second cup, $.75; and a third cup, $.50. If Elaine drinks three cups of coffee for breakfast, her marginal utility is equal to
A) $.50, the value of her last cup of coffee.
B) $1.00, the value of her first cup of coffee.
C) $2.25.
D) $1.50.

Question

Quizplus · Accepted Answer

Marginal utility refers to the additional satisfaction or value gained from consuming one more unit of a good or service. In this case, Elaine's marginal utility for the third cup of coffee is only $.50, the value of her last cup of coffee, because her overall utility decreases for each additional cup. Therefore, the best choice is A.

Elaine Values the Utility of Her First Cup of Coffee