Question

The following statement(s) regarding Utility Functions is/are true: Utility Functions are usually a function of wages. Utility increases at a decreasing rate. The Utility Function chosen does not matter. They will all yield the same result.

Answer 1

Answer:

Utility increases at a decreasing rate.

Explanation:

Utility is the total satisfaction derived from consumptjon.

The utility function measures the total satisfaction derived from consumptjon.

Utility increases at a decreasing rate.

This can be illustrated with an example.

Imagine I am coming from a desert with no access to drinking water. I am very thirsty. The satisfaction I would derive from the first cup of water would be the highest. After my first cup, the utility I would derive from other cups would be diminishing.