Which of the Following Statements Illustrates Diminishing Marginal Utility

question 36

Multiple Choice

Which of the following statements illustrates diminishing marginal utility?

• A)An extra dollar of income to a poor person provides that person with more additional utility than does an extra dollar to a rich person.
• B)An extra dollar of income to a poor person provides that person with less additional utility than does an extra dollar to a rich person.
• C)An extra dollar of income to a poor person provides that person with the same additional utility as does an extra dollar to a rich person.
• D)An extra dollar of income to a poor person provides that person with the same total utility as does an extra dollar to a rich person.

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Definitions:

Coincidence-of-Wants Problem

Refers to the difficulty in barter transactions where each party needs to have what the other wants and be willing to trade for it simultaneously.

Trade by Barter

The exchange of goods or services between parties without the use of money as a medium of exchange.

Capital Goods

Long-term assets such as buildings, machinery, and equipment used by businesses to produce goods and services.

Division of Labor

Division of labor is the assignment of different parts of a manufacturing process or task to different people in order to improve efficiency.