Question

1. Working with Numbers and Graphs Q1 The marginal utility for the fourth unit of X is 38 utils, and the marginal utility for the fifth unit of X is 19 utils. Assume that, in this case, utility can only take on whole number, integer, values measured in utils. If the law of diminishing marginal utility holds, the minimum total utility of consuming five units of X is utils.

Answer 1

Answer:

177 utils

Explanation:

Given that,

Marginal utility for the fourth unit of X = 38 utils

Marginal utility for the fifth unit of X = 19 utils

Law of diminishing marginal utility states that as a consumer is consuming more and more units of a commodity, the utility obtained from the additional unit goes on diminishing.

It states that,

Marginal utility of 4th unit is less than the marginal utility of 3rd unit.

Therefore, the minimum marginal utility of 3rd unit will be at least 39 utils,

the minimum marginal utility of 2nd unit will be at least 40 utils,

the minimum marginal utility of 1st unit will be at least 41 utils,

Total utility is the sum of all the marginal utilities.

Minimum total utility of consuming five units of X:

= 1st unit + 2nd unit + 3rd unit + 4th unit + 5th unit

= 41 + 40 + 39 + 38 + 19

= 177 utils