Which one of the following statements is not correct?

The relationship between total utility (TU) and marginal utility (MU) is a fundamental concept in consumer theory. As long as MU is positive, TU increases. When TU reaches its maximum point, MU is exactly zero, representing the point of satiation [1]. If consumption continues beyond this point, MU becomes negative, causing TU to decrease [1]. Therefore, statements 1, 2, and 3 are correct economic principles. Statement 4 is incorrect because at the point where TU is maximum, MU is zero, while average utility (AU) is typically positive (TU divided by quantity). MU and AU are generally equal only when AU is at its maximum, not when TU is at its maximum. This distinction is crucial in understanding the law of diminishing marginal utility [1].

Sources

1. [1] Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > Table 2.1: Values of marginal and total utility derived from consumption of various amounts of a commodity > p. 10