Question

According to the law of diminishing marginal utility, at what rate does total utility increase and what happens to marginal utility?

• A. TU increases at decreasing rate and MU falls
• B. TU increases at increasing rate and MU falls
• C. TU remains constant and MU falls
• D. TU decreases and MU rises

Answer 1

The correct option is A TU increases at decreasing rate and MU falls

According to the law of diminishing marginal utility, when marginal utility diminishes, total utility increases at a decreasing rate. Marginal utility is the rate of change in total utility, thus, it decides the slope of total utility curve.