Implicit in the solution to the diamond-water paradox is the idea that prices reflect __________ utility instead of __________ utility.
A)marginal; total
B)total; marginal
C)average; total
D)total; average
E)none of the above

Question

Quizplus · Accepted Answer

The diamond-water paradox is resolved by understanding that prices reflect marginal utility rather than total utility. This explains why diamonds, which have a high marginal utility due to their rarity, are priced higher than water, which has a lower marginal utility despite its higher total utility for survival.

Implicit in the Solution to the Diamond-Water Paradox Is the Idea