Diamonds are more expensive than water because
A)markets do not always reflect value.
B)they have fewer uses.
C)they are relatively scarce and they yield higher marginal utility.
D)they yield higher total utility.

Question

Quizplus · Accepted Answer

Diamonds are relatively scarce and yield higher marginal utility, which means that people are willing to pay more for each additional unit of a scarce good that gives them greater satisfaction. Water, on the other hand, is abundant and has a wide range of uses, so the marginal utility of a unit of water is lower, and the price is lower as well.

Diamonds Are More Expensive Than Water Because