File for Bankruptcy Instead of Completely Shutting Down

Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down?

In the United States, bankruptcy is governed by federal law. The state laws are often applied to determine how bankruptcy affects the property rights of debtors. However, there's a threshold. Bankruptcy cases are usually either voluntary or involuntary. Involuntary bankruptcy, which is the majority of cases, debtors petition the bankruptcy court. With involuntary bankruptcy, creditors file the petition in bankruptcy. The bankruptcy system generally tries to reward creditors who continue to extend financing to debtors and discourage creditors from accelerating their debt collection efforts. Avoidance actions are some of the most obvious of the mechanisms to encourage this goal.

Although they file for bankruptcy, and they possibly have to shut down in the end, they still continue operating. Why? Recall the profit-maximize firms are increasing their production until their marginal cost equals the marginal revenue, which doesn't make sense to produce one more to lose more money, and we can split the average total cost into two parts, the fixed cost, and the variable cost. The reason why they still stay in the market and continue operating is their operations can cover some fixed costs since the revenues are higher than the variable cost. If the price, the marginal revenue is higher than the variable cost, it means their operations actually help them to pay for some of their fixed cost. 

Suppose the Starbruce Bank is operating in the negotiation of bankruptcy. It earns $1,000,000 in revenue but has to pay $5,000,000 for fixed cost, and $200,000 for variable cost. So, the profit is $-4,200,000. If the Starbruce chooses to shut down, their revenue is zero, but still has to pay the $5,000,000 for the fixed cost. Compare those two options, you may find that continue operating is a relatively better choice.

Now we know the reason. Firms in the United States continue operating after filing for bankruptcy become it's less costly to file for bankruptcy and continue operating than to shut down because there are costs to shutting down and to resume business operations.

Imagine that you are managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10% less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?

While the oil price rises in earlier years, America’s shale oil industry entering the market of a near-monopoly market which almost being controlled by the OPEC. They clearly need to consider how the monopolist might react. The OPEC reacted with predatory pricing, which uses the threat of sharp price cuts to discourage competition. In the beginning, the OPEC wants to reduce the marginal revenue generated by America’s shale oil industry to make them unprofitable, since they can produce at a very low price. 

Similarly, if I managing a small firm and thinking about entering the market of a monopolist, I would have to consider the predatory pricing the monopolist might react. And I also need to consider the roots of the monopoly, was it natural, control of a physical resource, legal monopoly, patent, or just intimidating potential competitors like the OPEC. Before setting the strategies to entry, I better know how it monopoly or what is the monopolist. 

Reference

https://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States

Putin dumps OPEC to start a war with America's shale oil industry. (n.d.). Retrieved from https://www.worldoil.com/news/2020/3/6/putin-dumps-opec-to-start-a-war-with-america-s-shale-oil-industry

McFarlane, S., & Minczeski, P. (2019, April 18). OPEC vs. Shale: the Battle for Oil Price Supremacy. Retrieved from https://www.wsj.com/articles/opec-vs-shale-the-battle-for-oil-price-supremacy-11555588826

The Kinked Demand Curve and The OPEC

Would you expect the kinked demand curve to be more extreme (like a right angle) or less extreme (like a normal demand curve) if each firm in the cartel produces a near-identical product like OPEC and petroleum? What if each firm produces a somewhat different product? 

If the kinked demand curve to be a right angle, it more like a price ceiling set by the government or OPEC, which doesn't make sense since they all want to gain more profits. In an oligopolistic market, a firms' perceived demand curve is not fixed, since it keeps changing as competitors change the prices and the quantity of output. Moreover, in many oligopolist markets, it has been observed that prices tend to remain inflexible for a very long time. Even in the face of declining costs, they tend to change infrequently. In cartels like OPEC, their producers cooperating and controlling the output and price in the market to increase gains that behave like a monopoly. In this case, the demand curve becomes less extreme, which more like a normal market demand curve. 

The kinked demand curve of oligopoly assumes that response to a price increase is less than the response to a price decrease, and the elasticity of demand is perfectly elastic if price increases and perfectly inelastic if the price decreases. Although OPEC obviously knows that Oil has an inelastic demand curve, they mostly control and cooperating with reducing or increasing the output. They do not want to offer the market shares to the shale oil producers. 

Suppose each firm produces a somewhat different product, it may depend on either they are substitutes or not. If they are perfect substitutes, the price change will not seriously affect each other like they are producing identical products. Ultimately, they still have to consider the normal demand curve, since they cannot perfectly or totally control this market. 

When OPEC raised the price of oil dramatically in the mid-1970s, experts said it was unlikely that the cartel could stay together over the long term—that the incentives for individual members to cheat would become too strong. More than forty years later, OPEC still exists. Why do you think OPEC has been able to beat the odds and continue to collude? 

OPEC has acted as a monopoly for decades. They keep the price high to make higher profits. Oil has an inelastic demand curve, and this natural resource is luckily gifted to these countries. From the organization is started, they enforced cooperation through policy such as group production ceiling divided among members. Amazingly, OPEC has been successfully operating for decades, and its members are mostly oil-producing countries. 

Although OPEC has strong market power, each oil-producing country still needs that the world should have a high demand for its petroleum, and the alternative power resources are big threats. By cooperating, they may slow down the development of the substitutes. Furthermore, OPEC operates as a formal structure instead of an informal cartel who has to work behind the curtains. The structure of this organization helps the members implement more strict rules, ensuring they can trust each other, and able to supervise the overall supply. 

Reference

OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330

Stevens, P. (2020, April 10). OPEC and allies agree to historic 10 million barrel per day production cut. Retrieved from https://www.cnbc.com/2020/04/09/oil-jumps-ahead-of-make-or-break-opec-meeting.html

Kinked Demand Curve: Concept, Graphical Representation, Examples, etc. (2019, December 3). Retrieved from https://www.toppr.com/guides/business-economics/determination-of-prices/kinked-demand-curve/

Perfect Competition Market

Perfect Competition Market

1. Perfect competition is a theoretical market structure.
2. All firms are selling identical products.
3. All firms are price takers which means they cannot influence the market price of their product.
4. Market share has no influence on prices since the price is determined by supply and demand.
5. Buyers have complete information about the product being sold and the prices charged by each firm.
6. Resources (such as labors) are perfectly mobile.
7. Firms can enter or exit the market without any restrictions.

The Government Should Intervene in The Perfect Competition Market?

As a free country like Taiwan, the government is trying to do as few regulations or interruptions as they can. But sometimes, there are always some reasons the government should intervene or not. Most countries intervene in some specific market for multiple reasons such as national security, public health, avoid crime or fraud. However, even these restrictions seem to be positive, there are always some side effects that occur. The intervention is sometimes necessary and assists the market to increase the quality of the products or services. 

Reasons to Intervene

Most governments have a combination of many different objectives when they intervene in the market. 

Social Welfare

Without regulation, businesses can produce negative externalities without consequence. This all leads to diminished resources, stifled innovation, and minimized trade and its corresponding benefits. 

To Improve Variety and Quality

Choices are the basic power to move the economics forward. For instance, many Japanese railway companies are owned by private. If they are operating exactly the same lines and services, they don't have to compete with each other, they just have to operate like zombies. But if the government intervene in the market and regulate with the basic rules, the railway companies will follow up the steps to improve their services. Suppose the government regulates that all railways have to purchase insurance for their customers, those companies will now have to upgrade in order to stay in the market.

National Security

This is one of the most common reasons for governments to intervene in a perfect market since it is reasonable for a government to do it. For political reasons, it is also understandable. For instance, in the national defense industry, if firms can enter or exit the market without any restrictions, those secret data will be easy to out exposed.

For Macroeconomic

Governments are supposed to intervention to overcome prolonged recessions and reduce unemployment. Firms can enter or exit the market without any restrictions mean that the workers are at high risk. 

Public Goods

In a free market, public goods such as law and order and national defense would not be provided because there is no financial incentive to provide goods with a free-rider problem (you can enjoy without paying them). Therefore, to provide public goods like lighthouses, police, roads, it is necessary for a government to pay for them and out of general taxation.

Reasons for Do Not Intervene

Free market economists argue that government intervention should be strictly limited as government intervention tends to cause an inefficient allocation of resources.

Wrong Decisions

Governments are possible to make the wrong decisions and influenced by political pressure groups, they spend on inefficient projects which lead to an inefficient outcome.

Personal Freedom

Government intervention is taking away individuals' decisions on how to spend and act. The economic intervention takes some personal freedom away.

Reference

Hayes, A. (2020, February 5). Understanding Perfect Competition. Retrieved from https://www.investopedia.com/terms/p/perfectcompetition.asp

OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330

Boundless. (n.d.). Boundless Economics. Retrieved from https://courses.lumenlearning.com/boundless-economics/chapter/government-intervention-and-disequilibrium/

Pettinger, T., & Wes. (2020, April 30). Should the government intervene in the economy? Retrieved from https://www.economicshelp.org/blog/5735/economics/should-the-government-intervene-in-the-economy/

File for bankruptcyinstead of completely shutting down?

Critical Thinking Question 1

Many firms in the United States file for bankruptcy every year, yet they still continue operating. Why would they do this instead of completely shutting down?

The Answer

In the United States, bankruptcy is governed by federal law. The state laws are often applied to determine how bankruptcy affects the property rights of debtors. However, there's a threshold. Bankruptcy cases are usually either voluntary or involuntary. Involuntary bankruptcy, which is the majority of cases, debtors petition the bankruptcy court. With involuntary bankruptcy, creditors file the petition in bankruptcy. The bankruptcy system generally tries to reward creditors who continue to extend financing to debtors and discourage creditors from accelerating their debt collection efforts. Avoidance actions are some of the most obvious of the mechanisms to encourage this goal.

Although they file for bankruptcy, and they possibly have to shut down in the end, they still continue operating. Why? Recall the profit-maximize firms are increasing their production until their marginal cost equals the marginal revenue, which doesn't make sense to produce one more to lose more money, and we can split the average total cost into two parts, the fixed cost, and the variable cost. The reason why they still stay in the market and continue operating is their operations can cover some fixed costs since the revenues are higher than the variable cost. If the price, the marginal revenue is higher than the variable cost, it means their operations actually help them to pay for some of their fixed cost. 

Suppose the Starbruce Bank is operating in the negotiation of bankruptcy. It earns $1,000,000 in revenue but has to pay $5,000,000 for fixed cost, and $200,000 for variable cost. So, the profit is $-4,200,000. If the Starbruce chooses to shut down, their revenue is zero, but still has to pay the $5,000,000 for the fixed cost. Compare those two options, you may find that continue operating is a relatively better choice.

Now we know the reason. Firms in the United States continue operating after filing for bankruptcy become it's less costly to file for bankruptcy and continue operating than to shut down because there are costs to shutting down and to resume business operations.

Critical Thinking Question 2

Imagine that you are managing a small firm and thinking about entering the market of a monopolist. The monopolist is currently charging a high price, and you have calculated that you can make a nice profit charging 10% less than the monopolist. Before you go ahead and challenge the monopolist, what possibility should you consider for how the monopolist might react?

The Answer

While the oil price rises in earlier years, America’s shale oil industry entering the market of a near-monopoly market which almost being controlled by the OPEC. They clearly need to consider how the monopolist might react. The OPEC reacted with predatory pricing, which uses the threat of sharp price cuts to discourage competition. In the beginning, the OPEC wants to reduce the marginal revenue generated by America’s shale oil industry to make them unprofitable, since they can produce at a very low price. 

Similarly, if I managing a small firm and thinking about entering the market of a monopolist, I would have to consider the predatory pricing the monopolist might react. And I also need to consider the roots of the monopoly, was it natural, control of a physical resource, legal monopoly, patent, or just intimidating potential competitors like the OPEC. Before setting the strategies to entry, I better know how it monopoly or what is the monopolist. 

Reference

https://en.wikipedia.org/wiki/Bankruptcy_in_the_United_States

Putin dumps OPEC to start a war with America's shale oil industry. (n.d.). Retrieved from https://www.worldoil.com/news/2020/3/6/putin-dumps-opec-to-start-a-war-with-america-s-shale-oil-industry

McFarlane, S., & Minczeski, P. (2019, April 18). OPEC vs. Shale: the Battle for Oil Price Supremacy. Retrieved from https://www.wsj.com/articles/opec-vs-shale-the-battle-for-oil-price-supremacy-11555588826

How does fixed cost affect marginal cost?

How does fixed cost affect marginal cost? Why is this relationship important?

The Answer

A fixed cost is a cost that does not change with an increase or decrease while the amounts of goods or services produced or sold, and companies have the obligation to pay those fixed bills. In general, companies have to pay for two types of costs, fixed costs or variable costs. 

Marginal cost, on the other hand, is the change in total production cost that comes from making or producing one additional unit. Marginal cost of production includes all of the costs that vary with that level of production. For instance, if Apple needs to build a new factory in order to produce more iPad, the cost of building the factory is a marginal cost. The amount of marginal cost varies according to how many iPhone are being produced.

The marginal cost measures the change in the total cost with respect to the change in output, so a change in fixed costs does not affect the marginal cost. Suppose the fixed cost is $1,000, the variable cost is $200, and the quantity is 100 units. Then, the variable cost increase to $300, and the quantity is 200 units. The calculation for the marginal cost is:

Marginal cost = Total cost change / Quantity increased = ( $300 - $200 ) / (200 - 100 ) = $1 per unit.

As the calculation shows, the fixed cost does not affect the result since it remains unchanged. Moreover, if there are only fixed costs associated with producing goods, the marginal cost of production is zero. Because there is no change at all. However, the marginal cost of production is affected by variable costs associated with production. Just like the example shows, when the variable cost increase to $300, and the quantity is 200 units, the marginal cost starts increasing.

In the long term, while the fixed cost becomes less and less important, the marginal cost is the key to long term profitability. Focus on the marginal and slight changes that actually affect the operating, is more efficient while in the long term that fixed cost is relatively less important. We can focus on every marginal change in global warming not always compare the events to the beginning of the earth. 

A common name for fixed cost is “overhead.”

Critical Thinking Questions

A common name for fixed cost is “overhead.” If you divide fixed cost by the quantity of output produced, you get average fixed cost. Supposed fixed cost is $1,000. What does the average fixed cost curve look like? Use your response to explain what “spreading the overhead” means.

The Answer

As we know, fixed costs are expenditures that do not change regardless of the level of production, which means whether you produce a lot or a little, the fixed costs are the same. Average fixed cost curves are typically U-shaped. Supposed fixed cost is $1,000, the average fixed cost curve will look like a downward slope curve in the first period. Because in the beginning, each unit of production tends to share and lower the total cost, or we can say that as output grows, fixed costs become relatively less important. After it meets at the lowest average cost point, the curve may start to upward since each extra production tends to pull up the total cost. Because diminishing marginal returns implies that additional units are more costly to produce. 

Suppose Bruce starts his own coffee business with a $1,000 fixed cost at first, for purchasing an espresso machine, decorating the shop, pay the rents, and POS system. If his average cost per cup of coffee, for the first 10 cups he sold, is $102 

( ($1,000 +$2 x 10) / 10 ) = $102 

*Notice that the $2 per cup is a variable that appears from per cups of coffee sold.

If he produce and sold 20 cups of coffee, the average cost per transaction are more like $52

( $1,000 + $2 x 20 ) / 20 = $52 

If he produce and sold 30 cups, the average cost is approximately $35

( $1,000 + $2 x 30 ) / 30 = approximately $35

As we can see in the beginning, his average cost per cup of coffee is pretty high. But as more and more cups of coffee be produced and sold, the fixed cost becomes less and less important and relatively small, as the variable cost grows. The growing number of denominator also tends to pull down the result. From 10, 20, to 30 as the total cost increased from 1,020 to 1,060. 

If we separate the $1,000 from the calculation, the results will be like this. For the first 10 cups, is $100 ( $1,000 / 10 )  

*Notice that the prior $2 per cup is a variable that appears from per cups of coffee sold, and now we removed it. 

For 20 cups are sold, the average fixed cost is $50 ( $1,000 / 20 )

If he produces and sold 30 cups, the average fixed cost is approximately $33 ( $1,000 / 30 ) 

As we can see in the calculations, his average fixed cost per cup of coffee is lower and lower as he produces and sold more and more cups of coffee. As the fixed cost does not change, they spread overhead to 10, 20, or 30 units.

Fixed Costs and Marginal Costs in The Short Run

High Fixed Costs in The Short Run

A company's fixed cost does not vary with the volume of production. It remains the same even if no goods or services are produced, and cannot be avoided. 

Gilead Sciences, Inc is an American biopharmaceutical company headquartered in Foster City, California that researches, develops, and commercializes drugs. Remdesivir is a broad-spectrum antiviral medication developed by Gilead, as a solution to fight the coronavirus(COV-19), and has been issued an Emergency Use Authorization (EUA) in the U.S. for those hospitalized with severe disease. But before it actually in doctors' prescriptions, the company has to pay for the huge fixed cost in the short run such as research, development, tests, paychecks for high-education scientists, professional equipment for the labs, which are all very costly. If the cure has been found very successfully, the profit is substantial and the fixed cost in the short run becomes far less important. But before that, lots of money gonna be burned on the fixed cost. The Food and Drug Administration is the oldest comprehensive consumer protection agency in the U. S. federal government. Normally, a drug has to be verified by the FDA for its legalization. Unfortunately, It may take a very long period of time. Although fails are the only way to succeed, It is costly. Suppose you hire a team consisted of scientists, working for the solution to COV-19. Those scientists work 24/7 to find the solution and the facilities inside the lab are operating and analyze the data with no rest while your lab has not actually produced any one product. As the boss, you still have to pay the bills for continuing their research.

High Marginal Costs in The Short Run

The marginal cost of production is the change in total production cost that comes from making or producing one "additional" unit. As the word "additional", It is very different from the average cost. Automobiles Ettore Bugatti was a French car manufacturer of high-performance automobiles, founded in 1909 in the then-German city of Molsheim, Alsace by the Italian-born industrial designer Ettore Bugatti. Consider each additional luxury car, the company has to pay the very high sunk cost in the short run. To produce each additional well-design sports car, the fixed cost, and the variable cost are from the consumers' customization. The consumers want a special and limited car. Every additional customization means an additional new cost of design, production, or even new patented technology. Just like the official state "Extremely powerful and very exclusive. Bugatti hyper sports cars have always been at the very pinnacle of automobile construction. They are unique pieces of the highest quality and craftsmanship, developed and manufactured with enormous attention to detail". 

Reference

OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330

Gilead Sciences. (2020, May 5). Retrieved from https://en.wikipedia.org/wiki/Gilead_Sciences

Bugatti. (2020, February 16). Retrieved from https://en.wikipedia.org/wiki/Bugatti

Bugatti. (2020, May 7). Official BUGATTI Website. Retrieved from https://www.bugatti.com/

Brief Short-Answer Problems

Name a time you were indifferent between two goods. What were they? What made you indifferent between them?

If a combination of two goods that give a consumer equal satisfaction and utility, it's making the consumer indifferent. 

Remember the last time I walked into a MUJI store to buy a pen, there are blue and black ballpoint pens on the shelf. For me, It does not matter whether it is a blue or black ballpoint pen. They all do the same thing for me, which is, writing. Assume the amounts of satisfaction and utils that a blue ballpoint pen gives me is 1, the black ballpoint pen is the same amount of 1. Suppose both the blue and the ballpoint pen are $1, the marginal utilities per dollar is also the same. While I make my choice of picking a little more or a little less blue or black ballpoint pens, I got exactly the same satisfaction no matter what combinations of these two goods. 

Name a time there was a change (higher or lower) in your budget for two goods. What were they? How did the change affect your consumption choices?

I always have a cup of coffee in the morning, so I purchase coffee capsules very often. Whenever I purchase coffee capsules, I make a choice on how many the total amount of capsules and what kind of combinations of different tastes of coffee capsules, since there is a minimum for free shipping. Normally, I purchase a little bit above the minimum amounts for free shipping. Suppose my budget constraint per purchase is $100, I have to choose my combination of coffee capsules with a total amount of $100. Between the variety of tastes, the Ispirazione Palermo Kazaar and Ispirazione Ristretto Italiano are both my favorites. Assume they are both 10 utils for me, the same amounts reflect the indifference of these two goods. Usually, I purchase Kazzar and Italiano for half and half. They are both $0.5 per capsule in the past, but most recently the price of a Kazzar rises to $0.6 per capsule. In the past, I always purchased 100 capsules for Kazzar and 100 capsules for Italiano. After the increase in the price of per Kazzar capsule, the combination of capsules I put in my cart changed to 90 Kazzar capsules and 92 Italiano capsules. This change makes me reduce the total quantity of the capsules I purchase each time, but the total money I have to pay for it is the same.

How did the change affect my consumption choices? Due to my taste, the type of good, and budget constraint, I only changed the decision at the margin of my cart. In the short run, It's doesn't matter at all. But in the long run, I will keep finding any other solutions for the loss of the 18 capsules. Even so, If my income is higher than before while I purchase the coffee capsules, I will stop finding the solutions and accept the new price deal.

Name a time you believe you applied the utility maximization rule. What were the goods or services you chose to maximize your utility? How did this relate to your budget constraint?

Remember the last time I bought a new Timberland 6-inch Classic boots, I was struggling with the decision. There is a discount for a Converse Allstar Classic shoes, offered by the same store. Now the price of a pair of Converse Allstar Classic was $99, and the Timberland 6-inch Classic boots were $199. Which one satisfies me more? It's clearly the Timberland 6-inch Classic. But It is nearly two times more pain for me to pay for the price. So, I worked out a solution. Assume I get exactly the same satisfaction from the both, I started to think which one is more durable. Considered the Timberland 6-inch Classic boots is more durable than the Converse Allstar Classic for more than 2 years. Therefore, the utils of the Timberland 6-inch Classic is 3 and the Converse Allstar Classic is 1. Now I can make my decision easily since the utils are comfirmed. With the budget of $200, I should buy the Timberland 6-inch Classic first because it's 3 utils. 

However, the utils of the Timberland 6-inch Classic can drop quickly after I have got one. The second time I will choose the Converse Allstar Classic because it's satisfies more after I have got one Timberland 6-inch Classic. 

Reference

OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330

Examples of Diminishing Marginal Utility

Examples of Diminishing Marginal Utility

Free Buffet

Remember the last week when I went for a vacation in Tamsui Fisherman's Wharf, I booked the accommodations in Fullon Hotel. The breakfast was included and free. Unfortunately, because of the coronavirus(COV-19), their breakfast buffet has been canceled. So, while I checked in, the staff asked me what would I like for breakfast, Chinese cuisine, or western meals, and they will deliver it to my room in the morning. I wasn't sure how much the portion of their meals, so I ordered both of the two. The next morning when the staff knocked on my door for my breakfast, I was surprised. There are so many foods in front of me and I didn't know where to start. After I ate many pieces of bread and fruits, I started to feel my stomach might gonna blow. Every piece of the delicious bread was very enjoyed at the beginning, but it became less and less enjoyable. It feels like my stomach and tongue sent my brain a signal when too much breakfast has been consumed. Although the breakfast was the best that I have ever eat in my life, the marginal utility was diminishing as my stomach was full. My amazing level falls from 100% to even close to negative during the very first bite to the last one.

Too Much Sleep

Another example of the law of diminishing marginal utility is about sleeping. We all need some rest while we are tired. Enough sleep is good for our study and helps us to keep healthy. But what happens if we get too much sleep? Remember the last week, a time when I was lying on my bed. I was clearly awake, but I did not want to leave my comfortable and adorable little bed. So I decided to keep lying and closed my eyes to enjoy this relaxing moment. But as I closed my eyes, I could not fall asleep. Instead, I started to think about those things I want to do. Finally, I left my bed and went to meet my friends. In this case, it clearly shows that the highest util of sleep is when I was very tired. As the time pass, I have got enough sleep, it became less and less necessary.

Exceptions Situations

The law of diminishing marginal utility states that as more goods or services are consumed, the utility derived from them will fall. Nonetheless, there are some exceptions to this law. In some situations, consumers gain more utility as more and more of a good is consumed. One of them is personal hobbies such as antique collection, or savings in a bank. The satisfaction increases when a new antique or more money is collected or saved. For instance, when we set a saving goal such as $1,000,000 we gain more and more utility as we save more and more to achieve that goal. 

Reference

OpenStax College. (2016). Principles of economics. http://cnx.org/contents/69619d2b-68f0-44b0-b074-a9b2bf90b2c6@11.330