Which of the following statements about total utility (TU) and marginal utility (MU) is NOT correct?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → TU is the largest at the level of consumption where MU is the largest.
TU keeps rising while MU is positive, so TU is highest where MU has fallen to zero.
Option (1) TU is the largest at the level of consumption where MU is the largest. — False. For example, MU is largest at the 1st unit, but TU is largest (24) where MU reaches 0.
Option (2) The MU of the first unit is equal to the TU of the first unit. — True. TU1 = MU1.
Option (3) TU depends on the quantity of the commodity consumed. — True. TU depends on the quantity consumed.
Option (4) TU of n units is the sum of the MU of the first n units. — True. TUn = MU1 + MU2 + … + MUn.
NCERT (2026-27): “Measures of Utility Total Utility: Total utility of a fixed quantity of a commodity (TU) is the total satisfaction derived from consuming the given amount of some commodity x. More of commodity x provides more satisfaction to the consumer. TU depends on the quantity of the commodity consumed. … Total utility and marginal utility can also be related in the following way. TUn = MU1 + MU2 + … + MUn-1 + MUn …” “… Law of Diminishing Marginal Utility states that marginal utility from consuming each additional unit of a commodity declines as its consumption increases, while keeping consumption of other commodities constant. MU becomes zero at a level when TU remains constant. In the example, TU does not change at 5th unit of consumption and therefore MU5= 0. Thereafter, TU starts falling and MU becomes negative.” |