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Question
Fill in the blank with appropriate alternatives given below:
Marginal utility diminishes, as consumption of commodity ________.
Options
increases
decreases
remains constant
become zero
Solution
Marginal utility diminishes as consumption of commodity increases.
Explanation: When a consumer consumes more and more units of a commodity, the marginal utility derived from the consumption of each additional unit of the commodity tends to fall. Further, the utility may become zero and even negative. This is known as the Law of Diminishing Utility.
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