The law of diminishing marginal utility
A)allows us to make interpersonal utility comparisons.
B)tells us that an additional dollar is worth less to a millionaire than to a poor person.
C)tells us the worth of an additional dollar of income.
D)tells us that an additional dollar of income is worth less than the preceding dollar of income.

Question

Quizplus · Accepted Answer

The law of diminishing marginal utility states that the utility or satisfaction gained from consuming an additional unit of a good or service decreases as more units are consumed. This means that the value or worth of an additional dollar of income also decreases, making choice D the correct answer. Choice A is incorrect because the law does not allow for interpersonal comparisons, as utility is subjective and varies from person to person. Choice B is partially correct, but it only focuses on the value of money to different individuals rather than the overall decrease in utility. Choice C is incorrect because the law does not tell us the exact worth of an additional dollar, but rather the general trend of decreasing value.

The Law of Diminishing Marginal Utility