Question

Suppose you plan on eating 50 potato chips. As you start consuming potato chips, your marginal utility is very high, but it begins to fall slowly until you’ve eaten 10 chips. After you have eaten 10 chips, your marginal utility decreases even faster with each additional chip. Marginal utility continues to decline until you’ve eaten 49 chips. The fiftieth chip does not give you any additional utility. After 50 chips, your mouth gets so salty that it is unpleasant to eat any more, so marginal utility is actually negative for those chips. How many chips should you eat in order to maximize your total utility?

Group of answer choices

Answer 1

Consumption of 49 chips will maximize total utility.

Total utility means the total satisfaction that a person get from the consumption of a product whereas marginal utility is the additional utility that a person get from consuming one more unit of that product. Marginal utility becomes zero when total utility is at its maximum. Law of diminishing marginal utility says that as we keep increasing consumption of a product, the amount of satisfaction derived from the consumption of every additional unit of the product decreases. Initially total utility increases but at a decreasing rate & marginal utility is diminishing, then total utility reaches its maximum & marginal utility becomes zero & after that total utility starts decreasing & marginal utility becomes negative. So, in order to maximize total utility 49 chips should be consumed because consuming chips after that does not give any additional utility & marginal utility becomes negative if more than 50 chips are consumed.