When utility derived from many goods is multiplied or divided by any number, the new utility measure indicates
A)a different set of preferences for the highest and the lowest quantities of goods consumed, but the same preferences for the middle quantities.
B)the same preferences as before.
C)a different set of preferences only for the highest quantities of goods consumed.
D)a different set of preferences only for the lowest quantities of goods consumed.
E)an entirely different set of preferences.

Question

Quizplus · Accepted Answer

Multiplying or dividing the utility derived from many goods by any number does not change the rank order of preferences among these goods. It only changes the scale of measurement for the utility function. Therefore, the same preferences as before are retained.

When Utility Derived from Many Goods Is Multiplied or Divided