The Principle of Diminishing Marginal Utility Says That

question 172

Multiple Choice

The principle of diminishing marginal utility says that:

• A) as more of a good or service is consumed, demand decreases.
• B) as more of a good or service is consumed, the price will rise.
• C) the marginal utility of additional units consumed increases.
• D) an increase in income causes demand to increase.
• E) the marginal utility of additional units consumed decreases.

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Definitions:

Capital Budgeting

The process used by companies to evaluate and prioritize major investments or projects based on their potential to generate returns over time.

Cannibalization

The situation where a new product eats into the sales of one of the company's existing products, potentially reducing overall sales.

Net Present Value (NPV)

A valuation method used to assess the profitability of an investment by calculating the present value of expected future cash flows minus the initial investment cost.

Externality

A consequence of an industrial or commercial activity that affects other parties without this being reflected in market prices, often considered as either positive or negative.