Which one of the following statements is not correct?
When total utility is maximum, marginal utility is zero.
When total utility is decreasing, marginal utility is negative.
When total utility is increasing, marginal utility is positive.
When total utility is maximum, marginal and average utility are equal to each other.
Answer is Wrong!
Answer is Right!
This question was previously asked in
UPSC CDS-1 – 2019
– When TU is increasing, MU is positive.
– When TU reaches its maximum point, MU is zero (the consumer gets no additional satisfaction from the last unit consumed).
– When TU starts decreasing, MU becomes negative (the consumer experiences dissatisfaction from the last unit).
Average Utility (AU) is calculated as Total Utility divided by the number of units consumed (TU/Q). While MU is zero when TU is maximum, AU is generally positive at that point unless TU itself is zero (which is not the case when it’s at its maximum positive value). There is no principle in utility theory stating that marginal and average utility are equal when total utility is maximum.