ECO 211 Quiz 7

Marginal utility is the:

change in total utility obtained by consuming one more unit of a good.

Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4 respectively. The marginal utility of the last units of A and B are 16 and 24 respectively. These data suggest that Ms. Thomson:

should buy less B and more A.

The utility of a good or service:

is the satisfaction or pleasure one gets from consuming it.

The law of diminishing marginal utility explains why:

demand curves slope downward.

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is:

8 units of utility