One reason why water is cheap compared to diamonds is because the
A) marginal utility of water is enormous.
B) marginal utility of water is small.
C) total utility of water is enormous.
D) total utility of water is small.
E) total utility of water and diamonds must be equal, but the marginal utility of water is much lower than the marginal utility of diamonds.

Question

Quizplus · Accepted Answer

The marginal utility of water is small, meaning that each additional unit of water consumed provides a relatively low level of additional satisfaction. This is in contrast to diamonds, where each additional diamond provides a much higher level of satisfaction, making the marginal utility of diamonds much higher. Therefore, the price of diamonds is much higher than the price of water, as people are willing to pay more for something that provides them with a higher level of satisfaction.

One Reason Why Water Is Cheap Compared to Diamonds Is