Home › CA Foundation › Business Economics › Theory of Consumer Behaviour › When the marginal utility of a good becomes nega…
When the marginal utility of a good becomes negative, total utility derived from the good will:
Astay constant
Breach its maximum
Crise at a faster rate
Dbegin to decline
Answer & Solution
Correct answer: D. begin to decline
1. MU is the rate of change of total utility.
2. When MU turns negative, each extra unit reduces total utility, so TU begins to decline.
3. TU is maximum only when MU is zero, and it does not stay constant or rise faster, so those options are wrong.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit II "Theory of Consumer Behaviour", p.5_
Related questions
Which is stated as an advantage of indifference curve analysis over Marshall's marginal utAt the consumer's equilibrium point in indifference curve analysis, the marginal rate of sIn indifference curve analysis, a consumer attains equilibrium at the point where the budgA point lying inside (below) the budget line indicates that the consumer is:A consumer has Rs.100 to spend on ice cream priced at Rs.20 and chocolate priced at Rs.10.The slope of the budget line is determined by the:Two indifference curves can never intersect each other because intersection would imply thFor two goods that are perfect complements, such as a left shoe and a right shoe, the marg