If a Product Has a Diminishing, but Positive, Marginal Utility

question 221

Multiple Choice

If a product has a diminishing, but positive, marginal utility, then

• A)total utility decreases at an increasing rate.
• B)total utility will become negative.
• C)total utility increases at a diminishing rate.
• D)total utility decreases at a diminishing rate.

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Definitions:

Producer Surplus

The discrepancy between the price producers agree to sell a good for and the price they actually end up receiving.

Economic Efficiency

A condition in which resources are allocated in the most effective way possible, maximizing outputs from given inputs without waste.

Allocative Efficiency

A state of resource allocation where goods and services are distributed according to consumer preferences, reflecting an optimal distribution of resources.

Producer Surplus

The gap between the minimum amount sellers are prepared to accept for a product or service and the actual price it sells for.