The water and diamond paradox is called a paradox because the
A) total utility of water is higher than the total utility of diamonds but its marginal utility is lower than that of diamonds so, in the end, water appears to be less valuable than diamonds
B) total and marginal utility of diamonds are higher than that of water even though we tend to think of water being more valuable
C) marginal utility of water is higher than the marginal utility of diamonds but its total utility is lower than that of diamonds so, in the end, diamonds appear to be less valuable than water
D) total and marginal utility of water is higher than that of diamonds so, in the end, water appears to be less valuable than diamonds
E) marginal utility of diamonds is low because diamonds are scarce while the marginal utility of water is high because it is so valuable

Question

Quizplus · Accepted Answer

The paradox arises because water, which is essential for life and thus has a high total utility, has a low marginal utility due to its abundance. Diamonds, on the other hand, have a high marginal utility due to their scarcity, despite their lower total utility compared to water. This discrepancy leads to diamonds being priced higher than water, illustrating the paradox between utility and value.

The Water and Diamond Paradox Is Called a Paradox Because