Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Consumers will maximize their total utility by purchasing more of a good until its marginal utility equals its price.
B
Consumers will spend their entire budget on their favorite good regardless of its price.
C
Consumers will only buy goods that have a marginal utility greater than the average utility of all goods.
D
Consumers will avoid purchasing any goods with a positive marginal utility.
Understanding the Answer
Let's break down why this is correct
Answer
The principle of marginal utility suggests that consumers make choices based on the additional satisfaction they get from spending their money on different goods and services. When people allocate their budget, they will first buy items that provide the most enjoyment or usefulness per dollar spent. For example, if someone is deciding whether to buy a pizza or a salad, they will consider which one gives them more happiness for the price. As they continue to spend, they might find that each additional item they buy gives them less satisfaction than the previous one, leading them to choose different goods to maximize their overall happiness. This means consumers will try to balance their spending so that the last dollar spent on each item provides the same level of satisfaction.
Detailed Explanation
Consumers want to get the most happiness from their money. Other options are incorrect because This idea suggests people ignore prices and only buy what they like most; This option implies that people only buy items that are better than average.
Key Concepts
Marginal utility
Topic
Marginal Utility and Budgeting
Difficulty
easy level question
Cognitive Level
understand
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