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WAEC Economics 2014 Question 41

Question 41

Theory of Demand

Which of the following statements is correct?

  1. A.As total utility increases, the marginal utility also increases
  2. B.The marginal utility is always zero whenever the total utility reaches the maximum
  3. C.The total utility is at maximum whenever marginal utility is at it's maximum
  4. D.There is no relationship between total utility and the marginal utility.
Show the answer and explanation

Answer: B (The marginal utility is always zero whenever the total utility reaches the maximum)

Explanation

Total utility stops rising (is at its maximum) when the extra unit adds nothing: MU = 0.