Question

The table shows a consumer's utility schedule.

Number of Units Consumed	Total Utility
0	0
1	4
2	10
3	18
4	23
5	35

Based on the data, you can conclude that the consumer

Multiple Choice

receives increasing marginal utility from consuming the first three units.

experiences diminishing marginal utility after consuming the first unit.

experiences diminishing marginal utility only after consuming the fourth unit.

will never consume just one unit of the product.

Answer 1

The right answer is option 1: Receives increasing marginal utility from consuming the first three units.

Explanation:

Marginal utility refers to the additional total utility due to producing one additional unit. The marginal utility of different units of products are shown as follows:

Number of Units Consumed	Total Utility	Marginal Utility
0	0	-
1	4	4-0 = 4
2	10	10-4 = 6
3	18	18-10 = 8
4	23	23 – 18 = 5
5	35	35 – 23 = 12

We can see that the marginal utility of the first three units is 4,6 and 8. Therefore, we can say that the consumer receives increasing marginal utility from consuming the first three units.