Mark's marginal utility of a third waffle is 10 units and marginal utility of a second slice of ham is 30 units. If Mark eats the third waffle, which of the following statements is true?
A)The price of a waffle is five times more than the price of a slice of ham.
B)The price of a waffle is less than one-fourth the price of a slice of ham.
C)The price of a waffle is less than one-third the price of a slice of ham.
D)The price of a waffle is four times more than the price of a slice of ham.
E)The price of a waffle is three times more than the price of a slice of ham.

Question

Mark's marginal utility of a third waffle is 10 units and marginal utility of a second slice of ham is 30 units. If Mark eats the third waffle, which of the following statements is true?​
A)The price of a waffle is five times more than the price of a slice of ham.
B)The price of a waffle is less than one-fourth the price of a slice of ham.
C)The price of a waffle is less than one-third the price of a slice of ham.
D)The price of a waffle is four times more than the price of a slice of ham.
E)The price of a waffle is three times more than the price of a slice of ham.

Quizplus · Accepted Answer

According to the law of diminishing marginal utility, as consumption of a good increases, the marginal utility derived from each additional unit consumed decreases. Therefore, Mark's marginal utility for the third waffle is lower than the marginal utility for the second slice of ham, which means the price of the waffle must be less than the price of the slice of ham. The price of a waffle is less than one-third the price of a slice of ham.

Mark's Marginal Utility of a Third Waffle Is 10 Units