The assumption that more is better requires the consumer:
A)to rank any two baskets.
B)to say that basket is preferred to basket if basket is preferred to basket and basket is preferred to basket .
C)to rank a basket with more units of all goods higher than a basket with fewer units of all goods.
D)to have a diminishing marginal rate of substitution.

Question

Quizplus · Accepted Answer

The assumption that more is better implies that the consumer prefers a basket with more units of all goods than a basket with fewer units of all goods. This relates to the concept of marginal utility, where the consumer derives satisfaction from consuming more units of a good, but the satisfaction gained from each additional unit diminishes over time. Therefore, choice C correctly captures the idea that the consumer ranks a basket with more units of all goods higher than a basket with fewer units of all goods. The other choices either do not fully capture the assumption that more is better or introduce additional concepts not relevant to this assumption. The assumption that more is better implies that a basket with more units of all goods is preferred over a basket with fewer units of all goods. This assumes a positive marginal utility for each good, indicating that as more units of a good are consumed, the additional utility gained from each unit gradually diminishes. Therefore, it is not necessary for the consumer to rank any two baskets or have a diminishing marginal rate of substitution. Option B is also incorrect because it involves transitivity, which may not always hold true for consumers' preferences.

The Assumption That More Is Better Requires the Consumer