One relationship between marginal utility and total utility. When total is

Analyzing the question

The question asks about the relationship between marginal utility (MU) and total utility (TU). The sentence "When total is..." means "When total utility is...".

The concept

• Total utility (TU) is the total satisfaction from consuming all units of a good.
• Marginal utility (MU) is the extra satisfaction from consuming one more unit. It is the change in TU, or the slope of the TU curve.

Because of the law of diminishing marginal utility, MU falls as more units are consumed. The relationship goes through three stages:

| Stage | Total Utility (TU) | Marginal Utility (MU) | |---|---|---| | Early consumption | Rising | Positive (but usually falling) | | Saturation point | Maximum | Zero | | Over-consumption | Falling | Negative |

Testing each option

• A. TU rising, MU rising. Not the general rule. TU rises whenever MU is positive, and MU is normally falling because of diminishing returns to consumption. Wrong.
• B. TU falling, MU negative. Correct. TU only falls when each extra unit subtracts from satisfaction, meaning MU is below zero.
• C. TU maximum, MU maximum. Wrong. When TU is at its maximum, MU is zero, not maximum.
• D. TU falling, MU rising. Wrong. If TU is falling, MU must be negative, so it cannot be rising in a way that increases TU.

Worked example

| Units | TU | MU | |---|---|---| | 1 | 10 | 10 | | 2 | 18 | 8 | | 3 | 22 | 4 | | 4 | 22 | 0 | | 5 | 19 | −3 |

At the 5th unit, TU falls from 22 to 19, and MU is −3 (negative). This matches option B.

Answer: B

Exam tip: Remember "MU is the slope of TU."

• TU rising → MU positive
• TU at peak → MU = 0
• TU falling → MU negative