If marginal net utility is positive, the consumer must be buying too small a quantity to maximize total net utility. Why?
Because marginal utility exceeds price, the consumer can increase total net utility further by buying (at least) one more unit of the product. In other words, since marginal net utility (which is marginal utility minus price) tells us how much the purchase of an additional unit raises or lowers total net utility, a positive marginal net utility means that total net utility is still going uphill.
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George has a $600 annual entertainment budget that he uses to buy trips to the movies and dinners at local restaurants. The figure above shows indifference curves and budget lines for these two goods. The price of a movie is $15
a) Along budget line BL1, what is the price of a dinner? b) What combination of dinners and movies will George select along budget line BL1? c) Budget line BL2 represents a change in the price of dinners from that along BL1. What is the new price of dinners along this budget line? d) What combination of dinners and movies will George select along budget line BL2? e) Use the information in this problem to give two points on George's demand curve for dinners.
A corporation can elect to allocate corporate profits into either
A. Interest payments or dividends. B. Capital gains or dividends. C. Bonds or stocks. D. Dividends or retained earnings.
The average price level is measured by
a. the price of oil. b. the rate of inflation. c. the nominal interest rate. d. the GDP deflator or the CPI.
Open market operations are
A. the Federal Reserve's purchase and sale of existing U.S. government securities. B. the procedures of applying for loans at commercial banks. C. the procedures for approving loans at commercial banks. D. steps a bank must complete before it can invest in stocks on the open market.