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) increasing marginal utility.
D) consumption smoothing.
E) diminishing marginal utility.

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) increasing marginal utility. 
D) consumption smoothing. 
E) diminishing marginal utility.

Quizplus · Accepted Answer

Curve b exhibits diminishing marginal utility, as the slope of the curve becomes flatter as consumption increases. This means that additional consumption provides less and less additional satisfaction, which is a characteristic of diminishing marginal utility.

Refer to the Following Figure When Answering the Following Questions