The water and diamond paradox is explained by the fact that the total utility of water is higher than the total utility of diamonds, but the marginal utility of water is lower than the marginal utility of diamonds. Which of the following goods, when compared, have total and marginal utilities that best reflect the water and diamond paradox, although certainly not as vividly?
A) cake and ice cream
B) wine and soft drinks
C) jewelry and tattoos
D) bread and caviar
E) horses and automobiles

Question

Quizplus · Accepted Answer

Bread and caviar best reflect the water and diamond paradox. Bread, like water, has a high total utility because it is essential for survival and consumed in large quantities, but its marginal utility decreases with each additional unit consumed. Caviar, similar to diamonds, has a lower total utility due to its luxury status and limited consumption, but its marginal utility is high because each additional unit consumed is valued more due to its rarity and status symbol.

The Water and Diamond Paradox Is Explained by the Fact