Question

When total utility increases, marginal utility is _________.

• A. Negative and declining
• B. Negative and increasing
• C. Zero
• D. Positive and declining

Answer 1

The correct option is D Positive and declining

Relationship between TU and MU:

1.TU increases with an increase in consumption of a commodity as long as MU is positive. In this phase, TU increases but a diminishing rate as MU from each successive unit tends to diminish.

2.When TU reaches its maximum, MU becomes zero. TU stops rising at this stage. This point is known as point of satiety.

3.When consumption is increased beyond the point of satiety, TU starts falling as MU becomes negative.