[amp_mcq option1=”decreases” option2=”increases” option3=”varies from product to product” option4=”stays the same” correct=”option1″]
The correct answer is: A. decreases
The law of diminishing marginal utility states that as a consumer acquires more of a good, the marginal utility (additional satisfaction) that the consumer derives from each additional unit of the good decreases. This means that the consumer is willing to pay less for each additional unit of the good.
In the case of a bundle of goods, the per-product price that consumers are willing to pay for each good in the bundle will decrease as the number of goods in the bundle increases. This is because the consumer will derive less marginal utility from each additional good in the bundle.
For example, let’s say that a consumer is willing to pay $10 for a pizza. If the consumer buys two pizzas, the consumer will be willing to pay $9 for each pizza. If the consumer buys three pizzas, the consumer will be willing to pay $8 for each pizza. And so on.
The law of diminishing marginal utility is a fundamental concept in economics. It helps to explain why consumers are not willing to pay an infinite amount for goods and services. It also helps to explain why prices tend to decrease as the quantity of a good or service increases.