When total utility is at maximum, then marginal utility is

Analyze the question: It asks about the relationship between total utility (TU) and marginal utility (MU) at the point where TU reaches its peak.

Concept: Marginal utility is the extra satisfaction gained from consuming one more unit of a good. It is the change in total utility per extra unit consumed:

MU = ΔTU / ΔQ

How TU and MU relate:

• While MU is positive, each extra unit adds to TU, so TU rises.
• When MU falls to zero, an extra unit adds nothing, so TU stops rising. This is the maximum point of TU (the satiation point).
• When MU becomes negative, each extra unit reduces TU, so TU falls.

Example:

| Units | TU | MU | |---|---|---| | 1 | 10 | 10 | | 2 | 18 | 8 | | 3 | 22 | 4 | | 4 | 24 | 2 | | 5 | 24 | 0 | | 6 | 20 | -4 |

TU peaks at 24 when the 5th unit is consumed, and at that point MU = 0.

Checking the options:

• A. Decreasing: MU is falling throughout (law of diminishing marginal utility), but at the peak the specific value is zero, so this is not the best answer.
• B. Increasing: wrong, since MU keeps falling.
• C. Maximum: wrong, since MU is highest at the first unit.
• D. Negative: this happens after the TU peak, not at it.
• E. Zero: correct.

Answer: E. Zero

Exam tip: Remember "TU peaks when MU hits zero." Think of MU as the slope of the TU curve. At the top of a hill, the slope is flat, which means zero.