Refer to the following figure when answering the following questions.
Figure 16.1: Consumption Function
-Consider the utility functions in Figure 16.1. Curve b exhibits:
A) risk-taking behavior.
B) constant marginal utility.
C) diminishing marginal utility.
D) consumption smoothing.
E) None of these answers is correct.

Question

Refer to the following figure when answering the following questions.
Figure 16.1: Consumption Function 
-Consider the utility functions in Figure 16.1. Curve b exhibits:
A) risk-taking behavior. 
B) constant marginal utility. 
C) diminishing marginal utility. 
D) consumption smoothing. 
E) None of these answers is correct.

Quizplus · Accepted Answer

Curve b exhibits diminishing marginal utility, meaning that the additional satisfaction or utility gained from each additional unit of consumption decreases as consumption increases. This is shown by the downward slope of the curve.

Refer to the Following Figure When Answering the Following Questions