AP Microeconomics: Utility, Marginal Utility, and Choice Quiz

A hallmark assumption in microeconomics is that individual's act in a way that maximizes their utility. Individuals do this by comparing the marginal utility of the next unit consumed to the marginal cost. Consumers attempt to equate utility among all of their purchases. As individuals consume more and more of a good, they experience diminishing marginal utility. That is, with each additional unit of consumption, individuals receive less and less satisfaction. Diminishing marginal utility is graphically shown by the utility function which slopes upward and to the right at a decreasing rate. Economists like to define utility as the satisfaction of consuming an additional unit.