The high price of diamonds relative to the price of water reflects the fact that,at typical levels of consumption,
A)the total utility of water is relatively low.
B)the total utility of diamonds is relatively high.
C)the marginal utility of water is high.
D)the marginal utility of diamonds is relatively low.
E)None of the above is true.

Question

Quizplus · Accepted Answer

The high price of diamonds relative to water is due to the marginal utility of diamonds being high compared to water, not the total utility. The marginal utility of water is low because it is abundant, while diamonds are scarce, making their marginal utility high.

The High Price of Diamonds Relative to the Price of Water