Arthur has $7,800 dollars. He goes into an upscale men's store and buys 32 green sweaters, each costing $200. If Arthur has maximized his utility from this purchase, which of the following is the marginal utility of the thirty-third green sweater?

Question

Arthur has $7,800 dollars. He goes into an upscale men's store and buys 32 green sweaters, each costing $200. If Arthur has maximized his utility from this purchase, which of the following is the marginal utility of the thirty-third green sweater?​

Quizplus · Accepted Answer

The marginal utility of the thirty-third green sweater will be less than $200 because as Arthur buys more and more green sweaters, the additional satisfaction or utility he gains from each additional sweater decreases. This is the law of diminishing marginal utility. Eventually, the marginal utility becomes negative, but we cannot assume that it has reached that point without more information. Therefore, the marginal utility of the thirty-third sweater is still positive, but less than $200.

Arthur Has $7,800 Dollars