Jill's utility from an additional dollar increases more when she has $400 than when she has $200.From this,we can conclude that Jill
A) has an increasing marginal utility of wealth.
B) has a decreasing marginal utility of wealth.
C) is risk neutral.
D) has a negative marginal utility of wealth.

Question

Quizplus · Accepted Answer

The fact that Jill's utility from an additional dollar increases more when she has $400 than when she has $200 suggests that she has an increasing marginal utility of wealth. This means that as her wealth increases, the additional utility she gets from an additional dollar also increases. This is consistent with the idea that marginal utility decreases as we consume more of a given good, but it increases as we add more goods to our basket. So, the more wealth Jill has, the more valuable an additional dollar becomes to her.

Jill's Utility from an Additional Dollar Increases More When She