To resolve the diamond-water paradox, it is important to note that under most circumstances,
A)the marginal utility of water is lower than the marginal utility of diamonds.
B)the marginal utilities of water and diamonds are about the same.
C)the marginal utility of water is higher than the marginal utility of diamonds.
D)the marginal utilities of water and diamonds are inversely related.
E)the marginal utilities of water and diamonds are directly related.

Question

Quizplus · Accepted Answer

The diamond-water paradox is resolved by understanding that the marginal utility of water is lower than that of diamonds because water is abundant and diamonds are scarce. This means that the additional satisfaction (utility) gained from consuming one more unit of water is less than that from consuming one more unit of diamond.

To Resolve the Diamond-Water Paradox, It Is Important to Note