Question

When TU is maximum what value does MU take? What is it called?

• A. MU is negative and it is called breakeven point.
• B. MU is falling and it is called inflexion point.
• C. MU is zero and it is called saturation point.
• D. MU is rising and it is called shutdown point.

Answer 1

The correct option is C MU is zero and it is called saturation point.

When marginal utility is zero, then total utility is maximum because any further consumption of that commodity will lead to negative marginal utility and therefore total utility will tend to decrease. Therefore, it is called the saturation point as after this total utility falls.