Statement I: Utility is measured by how much a person is willing to pay for a good or service.
Statement II: If you buy four units of a good,your total utility is higher than if you purchased only three units.
A)Statement I is true and statement II is false.
B)Statement II is true and statement I is false.
C)Both statements are true.
D)Both statements are false.

Question

Quizplus · Accepted Answer

Statement I is correct because utility is the satisfaction or happiness that a person receives from consuming a good or service, and the amount a person is willing to pay for it indicates the level of utility they derive from it. 
Statement II is correct because the total utility increases as more units of a good are consumed, up to a certain point where the marginal utility (additional satisfaction from each additional unit) starts to decrease. Therefore, buying four units will provide a higher total utility than buying three units.

Statement I: Utility Is Measured by How Much a Person