Understanding Total Utility
Total utility refers to the overall satisfaction or pleasure derived from consuming a certain quantity of goods or services. It is essential to understand how total utility is maximized in economic terms.
Marginal Utility Explained
- Marginal utility is the additional satisfaction gained from consuming one more unit of a good or service.
- As consumption increases, marginal utility typically decreases due to the law of diminishing marginal utility. This means that each additional unit consumed provides less satisfaction than the previous one.
Maximum Total Utility
- Total utility reaches its maximum point when the marginal utility of consuming an additional unit becomes zero.
- When marginal utility is zero, it indicates that consuming more of the good will not increase satisfaction, and thus, total utility cannot increase further.
Why Option A is Correct
- At the point where marginal utility is zero, you have reached the optimal consumption level. Consuming more would not add to total satisfaction and could even lead to dissatisfaction.
- In contrast, if marginal utility is positive, total utility can still increase, and if it is negative, total utility will decrease.
Conclusion
- Therefore, the correct answer is option A: Total utility is maximum when marginal utility is zero, as it signifies the point of optimal consumption where no further satisfaction can be gained from additional units.

Explanation:
To understand why total utility is maximum when marginal utility is zero, let's first define these terms:
1. Total Utility: Total utility is the overall satisfaction or enjoyment that a consumer receives from consuming a certain quantity of a good or service.
2. Marginal Utility: Marginal utility refers to the additional satisfaction or enjoyment that a consumer receives from consuming one additional unit of a good or service.
Now, let's analyze the given options:
A. Marginal utility is zero:
- When marginal utility is zero, it means that consuming one additional unit of a good or service does not provide any additional satisfaction or enjoyment.
- In this case, the consumer has already reached the maximum level of satisfaction or enjoyment from consuming the given quantity of the good or service.
- Therefore, total utility is maximized when marginal utility is zero.
B. Marginal utility is at its highest point:
- While it is true that marginal utility is maximized when it starts to decrease, it does not necessarily mean that total utility is also maximized at this point.
- Total utility can still increase even when marginal utility is decreasing, as long as the additional satisfaction or enjoyment from consuming each additional unit is positive.
C. Marginal utility is equal to average utility:
- Average utility refers to the total utility divided by the quantity consumed.
- While there is a relationship between marginal utility and average utility, it does not determine the maximum level of total utility.
- Marginal utility can be positive or negative even when average utility is equal to it.
D. Average utility is maximum:
- Average utility can be maximized at a certain point, but it does not necessarily mean that total utility is also maximized.
- Total utility depends on both the quantity consumed and the level of satisfaction or enjoyment derived from each unit.
In conclusion, the correct answer is A: Marginal utility is zero. Total utility is maximized when the consumer has reached the maximum level of satisfaction or enjoyment from consuming the given quantity of the good or service.