Microeconomics: Principles, Problems, & Policies, 20th Edition

Published by McGraw-Hill Education
ISBN 10: 0077660811
ISBN 13: 978-0-07766-081-9

Chapter 7 - Utility Maximization - Discussion Questions - Page 163: 1


Missing total utility data, top – bottom: 18; 33. The missing total utility for the second unity can be found by adding the marginal utility (change in utility) to the total utility for the first unit. By consuming the second unit, 8 more units of utils are added; thus total utility is 18 (= 10 + 8). Missing marginal utility data, top – bottom: 7; 5; 1. The missing marginal utility values are found by subtracting the total utility for the previous unit consumed from the total utility of the unit with the missing value (the change in utility). The marginal utility for the third unit is 7, which equals 25 (total utility for the third unit) minus 18 (total utility for the second unit). a. A decreasing rate; because the marginal utility is declining. b. Disagree. The marginal utility of a unit beyond the first may be sufficiently great (relative to product price) to make it a worthwhile purchase. Consumers are interested in maximizing total utility, not marginal utility. c. Agree. This product’s price could be so high relative to the first unit’s marginal utility that the consumer would buy none of it.

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