Question

Paul Mabaso'"s average utility from the consumption of 8 chocolate is 25 utils per slab. If the marginal utility of the 9th slab is 20 utils, will his average utility increase, decrease or stay constant if he consumes 9 slab ?Explain. What will happen to his total utility ?

Answer 1

Paul Mabaso'"s average utility will decrease, because marginal utility is less than average one on the segment of downward sloping average utility curve. Total utility still increases because marginal utility is positive.