ECONOMICS
CONSUMERS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The total utility of consuming two units is 120
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The marginal utility of the first unit is 20
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The marginal utility of the second unit is 120
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The marginal utility of the second unit is 80 utils
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Detailed explanation-1: -Which of the following is true if consuming one unit of a good yields 100 utils and consuming the second unit of the good increases satisfaction by 20 utils? (D)The total utility of consuming two units is 120.
Detailed explanation-2: -Total utility is the aggregate satisfaction that an individual receives from consuming a specific quantity of a good or service.
Detailed explanation-3: -Marginal utility is the added satisfaction that a consumer gets from having one more unit of a good or service. The concept of marginal utility is used by economists to determine how much of an item consumers are willing to purchase.
Detailed explanation-4: -When marginal utility is zero, the consumer derives no further utility from consumption and any further consumption will lead to negative marginal utility. Thus, the total utility is maximum at this point and any further consumption of that commodity will lead to a diminishing total utility.
Detailed explanation-5: -marginal utility is zero. The total utility is maximum when marginal utility is zero. This is because of the prevalence of the law of diminishing marginal utility which states as a consumer consumes more and more of a good, the addition to the total utility falls.