CFA Practice Question

CFA Practice Question

Which of the following is incorrect?
A. The law of diminishing marginal utility implies that the total utility from consumption of a good will fall when consumption exceeds a certain amount.
B. A positive outcome of regulation is that a monopolist can be forced to produce quantity where price equals marginal cost rather than where marginal revenue equals marginal cost.
C. A negative outcome of regulation is that the regulatory bodies may be 'captured' the industries they regulate and used to shelter the incumbents from competition.
Explanation: The law of diminishing marginal utility implies that the marginal utility derived from every successive unit of consumption of a good, is less than the marginal utility from the consumption of the prior unit. Also falling total utility implies that that marginal utility has become negative, which is not an implication of the law of diminishing marginal utility.

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