Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They are comparing the marginal benefit per dollar to other goods and find it favorable.
B
They believe that total benefit will always increase regardless of marginal benefit.
C
They have a fixed budget that forces them to allocate their remaining funds to this good.
D
They mistakenly think that marginal cost will decrease with increased consumption.
Understanding the Answer
Let's break down why this is correct
Answer
When a consumer finds that the marginal benefit of a good decreases as they consume more, it means that each additional unit of the good provides less satisfaction than the previous one. However, they might continue to purchase more units if the price of the good is low enough compared to the benefit they still receive. For example, if someone loves pizza, the first slice might bring them a lot of joy, and the second slice still feels good but less so. If the price of each slice is cheap, they may decide it’s worth it to buy another slice, even if it doesn’t excite them as much as the first. This decision is based on comparing the decreasing benefit to the cost, and if the cost is lower than the benefit, they will continue to buy more.
Detailed Explanation
Consumers look at how much benefit they get for each dollar spent. Other options are incorrect because Some people think that buying more always means more total benefit; Having a fixed budget doesn't mean you should buy more of one thing.
Key Concepts
Marginal Benefit Calculation
Consumer Decision-Making
Budget Constraints
Topic
Marginal Benefit Calculation
Difficulty
medium level question
Cognitive Level
understand
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