Question

. As you start consuming potato chips, your marginal utility is very high, but it begins to fall slowly until you've eaten 10 chips. After you have eaten 10 chips, marginal utility decreases even faster with each additional chip. Marginal utility continues to decline until you’ve eaten 49 chips. The fiftieth chip does not give you any additional utility. After 50 chips, your mouth gets so salty that it is unpleasant to eat any more, so marginal utility is actually negative for those chips. How many chips should you eat in order to maximize your marginal utility?
1


10


49


50

Answer 1

Answer:

The correct answer is 10 chips.

Explanation:

A person is eating chips. Initially, the marginal utility is very high, but after 10 chips it starts declining. It declines till 49 chips and after that it becomes negative.  

We see that the marginal utility derived from the consumption of chips start to decline after consuming 10 chips.

This implies that marginal utility is being maximized at the consumption of 10 chips.  

So the utility-maximizing quantity of chips is 10 chips.