CMA Foundation · Fundamentals of Business Economics and Management · Utility, Wealth, Production
Ravi consumes samosas and derives the following total utility (utils): 1st = 20, 2nd = 36, 3rd = 48, 4th = 56, 5th = 60. What is the marginal utility of the 4th samosa?
The marginal utility of the 4th samosa is 8 utils. It equals the addition to total utility from consuming the fourth unit, that is 56 minus 48. The figure 56 is total utility, not marginal utility.
- A8Correct
- B14
- C56
- D12
Explanation
Marginal utility of the 4th unit = TU4 - TU3 = 56 - 48 = 8 utils. Choosing 56 confuses total utility with marginal utility. Choosing 12 is the marginal utility of the 3rd unit (48 - 36).
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