Question

After eating four slices of pizza, vou are offered a fifth slice for free. You down down this fifth slice. Your refusal indicates that the:
a. Marginal utility for four slices is negative
b. Total utility for five slices is negative
c. Marginal utility is positive for the fourth slice and negative for the fifth slice
d. Marginal utility for the fourth slice is the largest among all slices.

Answer 1

Answer:

C. Marginal Utility is positive for the 4th slice, negative for 5th slice.

Explanation:

Total Utility is the total amount of satisfaction from consumption of all units of a good.  TU = ΣMU

Marginal Utility is the additional satisfaction from consumption of an additional unit of a good. MU = TUn - TUn-1

As per Law of Diminishing Marginal utility:  Consuming additional units of a good increases marginal utility by lesser magnitude than the preceding unit consumption.

A consumer consumes a commodity only if: It increases or atleast keeps constant its Total Utility i.e Total Satisfaction & It's Marginal Utility i.e Additional Satisfaction is positive or atleast 0.

Falling TU & negative MU implies the consumption of that unit is doing worse rather than good to consumer's satisfaction, so he/ she wont consume it.

So, in this case: refusing to consume 5th unit of commodity (Pizza) slice implies its MU i.e additional satisfaction will be negative & Total Utility i.e satisfaction would be falling.