The Law of Diminishing Marginal Utility

question 21

Multiple Choice

The law of diminishing marginal utility

• A)is valid only after basic necessities (such as food and shelter)have been obtained
• B)says that marginal utility decreases as more of a good is consumed
• C)implies that spending on a good will decrease as more of that good is consumed
• D)says that marginal utility decreases as income increases
• E)implies that spending on a good decreases as income increases

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Definitions:

Ration Coupons

Documents or certificates that allow the holder to purchase a certain amount of a product, used especially during shortages to ensure fair distribution.

Government-mandated Increase

A requirement imposed by the government that results in a rise, often relating to wages, prices, or taxes.

Demand and Supply Curves

Graphs used in economics to illustrate the relationship between how much of a good or service is desired by buyers (demand) and how much is available from suppliers (supply) at various prices.

Product Market

A market in which products are sold by firms and bought by households.