Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Their overall utility will increase because the additional benefit exceeds the cost.
B
Their overall utility will decrease due to the increased expenditure.
C
Their utility will remain unchanged as they are already at optimal consumption.
D
Their overall utility will decrease because they cannot afford more goods.
Understanding the Answer
Let's break down why this is correct
Answer
When a consumer buys an additional unit of a good and the marginal benefit is greater than the marginal cost, their overall satisfaction, or utility, is likely to increase. This happens because the consumer feels that the extra benefit they gain from that unit outweighs what they had to give up to get it. For example, if someone buys an extra slice of pizza and enjoys it more than the money they spent, they feel happier. This decision adds to their overall enjoyment and makes them feel better off. Therefore, when the benefit exceeds the cost, it leads to a positive change in their utility.
Detailed Explanation
When the extra benefit from a good is more than what you pay, you feel happier. Other options are incorrect because Some might think spending more money always makes you worse off; It's a common mistake to think you can't gain more happiness if you're already buying enough.
Key Concepts
Marginal Analysis
Utility Maximization
Consumer Surplus
Topic
Marginal Analysis
Difficulty
medium level question
Cognitive Level
understand
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