In perfect competition, why is it good that Utility = 0, shouldn't Utility/Benefit be more than 0? Otherwise how is a company making money?
- OiyLv 61 month ago
Total utility might not reach zero,but its marginal value. In economics, it is MU/$ That makes the sense. And everything will stop where all MU/$ are equal.
- roderick_youngLv 71 month ago
Maybe the definition of utility here is from the consumer's viewpoint, not the manufacturer's. The price of a certain very tasty brand R of ramen is driven up to what the market will bear. Considering that price, the hypothetical consumer is right on the fence between paying a dollar more for brand R, or saving a dollar going with brand T. When the cost is considered, the net utility of getting R over T is zero.
It might cost company R 20 cents to make their ramen, and company T 15 cents, so both companies are making money.
I will yield to an Economist or Economics major, though.