Managerial Economics 12th Edition by Mark Hirschey

Exercise 2

Law of Diminishing Marginal Utility. Indicate whether each of the following statements is true or false. Explain why.
A. The law of diminishing marginal utility states that as an individual increases consumption of a given product within a set period of time, the utility gained from consumption eventually declines.
B. When prices are held constant, a diminishing marginal utility for consumption decreases the cost of each marginal unit of satisfaction.
C. Marginal utility measures the added satisfaction derived from a 1-unit increase in consumption, holding consumption of other goods and services constant.
D. When goods are relatively scarce, the law of diminishing marginal utility means that the added value of another unit of goods will be small in relation to the added value of another unit of services.
E. The law of diminishing marginal utility gives rise to a downward-sloping demand curve for all goods and services.