Question

(01.03 mc)
which statement describes the law of diminishing marginal utility?
o making choices requires trade - offs and opportunity cost because of limited resources.
o a maximum amount exists for a good or service that will be purchased at a given price.
o the total amount of a good or service that people consume decreases as price decreases.
o there is a decrease in satisfaction from each additional unit of a good or service consumed.

Explanation:

The Law of Diminishing Marginal Utility states that as a consumer consumes more units of a good or service, the additional satisfaction (marginal utility) from each additional unit decreases.

• The first option is about opportunity cost due to limited resources, not related to marginal utility.
• The second option is about quantity demanded at a price (more related to demand concept in general, not specifically marginal utility).
• The third option is incorrect as typically when price decreases, quantity consumed (in normal cases) increases.
• The fourth option correctly aligns with the definition of the Law of Diminishing Marginal Utility.

Answer:

There is a decrease in satisfaction from each additional unit of a good or service consumed.