Hey, I'm struggling with the following, which should be pretty straightforward at this stage: To me none of the last 3 options make sense B) Doesn't Marginal Utility decrease at a decreasing rate with income? C) Same as B except the other way around, as income falls marginal utility increases. D) This is the answer they gave and obviously not implied by the theory, but are B and C? Can anyone explain how B and C are implied by the principle of diminishing marginal utility of income? Anyone have any insight?
This question actually wrecked my head today, couldn't make heads or tails of it, eventually I was thinking "Jesus Christ, this should be obvious at this stage", I was hoping I was just burnt out from the week. I just reopened it to take another look and noticed the following on the examiner's report: I'm a dummy.
This was a bad question. The examiners awarded the mark to everyone. All that the theory says is that marginal utility falls as consumption increases, ie that total utility increases at a decreasing rate. This means that A is true. If we remove the "NOT" from the question, A would be the correct answer! I'm afraid that bad questions do sometimes occur. Have confidence in yourself - as you say, you should know the answer at this stage. If you have a question like this, always go for one answer, but write a note to the examiner explaining any problems.
