If consumption exhibits diminishing marginal utility, then:
A) utility can never be equal to zero.
B) the utility function is downward sloping.
C) additional units of consumption after some threshold make one worse off.
D) more consumption leads to declining utility.
E) additional units of consumption raise utility by smaller and smaller amounts.

Question

Quizplus · Accepted Answer

Diminishing marginal utility means that each additional unit of consumption increases utility by smaller and smaller amounts, eventually leading to a point where additional consumption leads to a decline in utility. This concept is represented by a downward sloping utility function. Therefore, the correct option is E - "additional units of consumption raise utility by smaller and smaller amounts."

If Consumption Exhibits Diminishing Marginal Utility, Then