Figure 19-1.The figure shows a utility function.
-Refer to Figure 19-1.For the person to whom this utility function applies,
A) the more wealth she has,the less utility she gets from an additional dollar of wealth.
B) the more wealth she has,the more utility she gets from an additional dollar of wealth.
C) her level of satisfaction will be enhanced more by an increase in wealth from $600 to $800 than it would be by an increase in wealth from $400 to $600.
D) her level of satisfaction will be enhanced equally by an increase in wealth from $600 to $800 or by an increase in wealth from $400 to $600.

Question

Figure 19-1.The figure shows a utility function. 
-Refer to Figure 19-1.For the person to whom this utility function applies,
A) the more wealth she has,the less utility she gets from an additional dollar of wealth. 
B) the more wealth she has,the more utility she gets from an additional dollar of wealth. 
C) her level of satisfaction will be enhanced more by an increase in wealth from $600 to $800 than it would be by an increase in wealth from $400 to $600. 
D) her level of satisfaction will be enhanced equally by an increase in wealth from $600 to $800 or by an increase in wealth from $400 to $600.

Quizplus · Accepted Answer

This utility function exhibits the decreasing marginal utility of wealth. As the person gets more wealth, the additional satisfaction she gets from an extra dollar of wealth declines. Therefore, option A is the correct choice. Option B is incorrect because it suggests increasing marginal utility of wealth, which is not consistent with the utility function given. Option C and D are also incorrect because they make assumptions about the level of satisfaction without enough information to support those assumptions.

Figure 19-1.The Figure Shows a Utility Function