CMA Foundation · Fundamentals of Business Economics and Management · Utility, Wealth, Production
Anita's total utility from consuming oranges is 15 utils for 1 orange, 27 for 2 oranges, 36 for 3 oranges and 42 for 4 oranges. What is the average utility per orange when she consumes 4 oranges, and what is the marginal utility of the 4th orange?
Average utility is total utility divided by units, 42 divided by 4, which equals 10.5 utils. Marginal utility of the fourth orange is the addition to total utility, 42 minus 36, which equals 6 utils. So average is 10.5 and marginal is 6 utils.
- AAverage 10.5 utils; marginal 6 utilsCorrect
- BAverage 10.5 utils; marginal 42 utils
- CAverage 6 utils; marginal 10.5 utils
- DAverage 14 utils; marginal 6 utils
Explanation
Average utility = TU/units = 42/4 = 10.5 utils. Marginal utility of the 4th orange = TU4 - TU3 = 42 - 36 = 6 utils. Option 'average 6, marginal 10.5' swaps the two concepts, and 42 as marginal confuses total with marginal utility.
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