Question

When marginal utility becomes negative then TU ______.

Options

• increases

• remain same

• decreases

• negative

Answer 1

When marginal utility becomes negative then TU decreases.

Explanation:

When total utility is maximum, marginal utility is zero. When total utility curve reaches its maximum (at point M), its slope is zero between M and N. This is another way of saying that marginal utility is zero. The point where marginal utility becomes zero, is called the point of satiety. After N, of the total utility curve has a negative slope, showing that the marginal utility is negative. Thus, when total utility declines marginal utility is negative.