1.
Give a numerical example that illustrates total utility rising as marginal utility declines.
Hailey gets $2 of utility from eating one donut and gets $1 of utility from eating a second donut in the same period. Her total utility rises from $2 to $3 as she eats the second donut, although her marginal utility falls.
2
. The law of diminishing marginal utility is consistent with the fact that people trade. Do you agree or disagree? Explain your answer.
I agree to this statement because when does marginal utility received from the consumption of a particular commodity is falling for someone, he or she is likely to indulge in trade of this commodity with someone for whom the marginal utility is relatively greater.
3. “If we take $1 away from a rich person and give it to a poor person, the rich person loses less utility than the poor person gains.” Comment.
May or may not be true. We don't know how much utility the person loses nor how much utility the poor person gains.
4. Is it possible to get so much of a good that it turns into a bad? If so, give an example.
It is possible to consume so much of a good that it turns out into a bad good and the marginal utility becomes negative. This is according to the law of Diminishing marginal utility, which suggests that as a person increases the consumption of one good, after a certain point, the total utility decreases and the marginal utility becomes negative.
5. If a person consumes fewer units of a good, will marginal utility of the good increase as total utility decreases? Why or why not?
Yes, if the marginal utility of the units of the goods no longer consumed was not negative. If a person eats 5 units of good X, and total utility is 40 utils and marginal utility is 6. If she consumes one less unit of X, or 4 units, total drops down to 34 utile but marginal utility rises to 7
utils.
6. The marginal utility of good A is 4 utils, and its price is $2. The marginal utility of good B
is 6 utils, and its price is $1. Is the individual consumer maximizing (total) utility if she spends a total of $3 by buying one unit of each good? If not, how can more utility be obtained?
No, they should consume more B & less A
