Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

18. Consumer Choice and Behavioral Economics

Consumer Optimum Consumption: Marginal Utility per Dollar Spent

Microeconomics

18. Consumer Choice and Behavioral Economics

Consumer Optimum Consumption: Marginal Utility per Dollar Spent

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Multiple Choice

As Caffeinated Carl consumes additional cups of coffee, his

Marginal utility from coffee increases

Marginal utility from coffee decreases

Total utility from coffee decreases

Both (b) and (c) are correct

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Verified step by step guidance

Understand the concept of Marginal Utility: Marginal utility refers to the additional satisfaction or benefit (utility) that a consumer derives from consuming an additional unit of a good or service.

Recognize the Law of Diminishing Marginal Utility: This law states that as a person consumes more units of a good, the additional satisfaction gained from consuming each additional unit tends to decrease.

Apply the Law of Diminishing Marginal Utility to the problem: As Caffeinated Carl consumes more cups of coffee, according to the law, his marginal utility from each additional cup should decrease, not increase.

Evaluate the given options: The correct understanding is that the marginal utility from coffee decreases as more is consumed, which aligns with option (b).

Consider the implications on total utility: While marginal utility decreases, total utility can still increase as long as marginal utility is positive, but it will eventually decrease if marginal utility becomes negative.