Question

When neoclassical economists assume that individuals are rational, they mean that people

a. are generally unselfish and self-sacrificing.

b. make purposeful choices based on their own self-interest.

c. make impulsive decisions based on what feels good at the time.

d. rarely show emotion.

What does the assumption of diminishing marginal utility mean?

a. utility cannot be precisely measured but consumers can produce a ranking of consumption choices.

b. an increase in units of labor will leads to less and less additional output.

c. eventually additional units consumed will lead to a decline in total utility.

d. as more units are consumed each additional unit will provide less and less additional utility

Answer 1

1-Make purposeful choices based on their own self interest.

In general Ratinal people are those people who base their judgement on the basis of cost and benefit involved, deliberately trying to make the most of the deal.

2-As more units are consumed each additional unit wilk provide less and less marginal utility.

Law of diminishing marginal utility implies that that the consumption of more and more of a commodity will eventually lead to providing less of marginal utility by each consumption.