CMA Foundation · Fundamentals of Business Economics and Management · Utility, Wealth, Production
Total utility (in utils) of Arjun from consuming 1, 2, 3, 4 and 5 cups of tea is 15, 27, 36, 42 and 45 respectively. What is the marginal utility of the 4th cup and what is its trend?
The marginal utility of the 4th cup is 6 utils, found as 42 minus 36, and it is falling. The successive marginal utilities are 15, 12, 9, 6 and 3, which shows diminishing marginal utility as Arjun drinks more tea.
- A6 utils, and it is fallingCorrect
- B42 utils, and it is falling
- C6 utils, and it is rising
- D9 utils, and it is falling
Explanation
MU of the 4th cup = TU4 - TU3 = 42 - 36 = 6 utils. The marginal utilities are 15, 12, 9, 6, 3, so they fall steadily. Option 9 is the MU of the 3rd cup, and 42 is the total utility, not marginal.
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