Diminishing Marginal Utility is the basis by which a good gets its value in the marketplace? As part of your answer explain the concepts of consumer's preference and consumer's surplus and how they contribute to the valuation process.

The concept of diminishing marginal utility holds that the more a consumer consumes something, the less he or she will gain in terms of his or her real and perceived value of that good, from adding additional units of that good to his or her market basket. For example, by offering a discount for every next doughnut purchased at a coffee shop, the owner creates an incentive for a consumer to buy two, rather than one doughnut, thus raising the overall volume of sales. However, if the consumer gains a discount for every additional doughnut, not just the second doughnut, the discount on the third doughnut will not be as important to...
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