Suppose for a utility function that the marginal utility for good x is given by MU_x = 5y²/x A) The more is better assumption is not satisfied for x in this utility function. B) The more is better assumption is satisfied for x in this utility function. C) This shows a positive and increasing marginal utility of x. D) The marginal rate of substitution must be diminishing.

Question

Quizplus · Accepted Answer

The marginal utility for good x is positive and increasing, which satisfies the more is better assumption. This utility function does not indicate whether the marginal rate of substitution is diminishing or not.

Suppose for a Utility Function That the Marginal Utility for Good