Exhibit 6-1 Total utility for good X

As shown in Exhibit 6-1, the law of diminishing marginal utility is first observed at the:
A) first unit.
B) second unit.
C) third unit.
D) fourth unit.

Question

Exhibit 6-1 Total utility for good X

As shown in Exhibit 6-1, the law of diminishing marginal utility is first observed at the:
A) first unit. 
B) second unit. 
C) third unit. 
D) fourth unit.

Quizplus · Accepted Answer

The law of diminishing marginal utility states that as more of a good is consumed, the additional satisfaction (or marginal utility) from each additional unit consumed will eventually decrease. In Exhibit 6-1, we can see that the total utility increases with each unit consumed, but the increase from the first unit to the second unit is greater than the increase from the second unit to the third unit. This indicates that the law of diminishing marginal utility is first observed at the second unit. Therefore, the best choice is B.

Exhibit 6-1 Total Utility for Good X