The high price of diamonds relative to the price of water reflects the fact that, at typical levels of consumption,
A)the total utility of water is relatively low.
B)the total utility of diamonds is relatively high.
C)the marginal utility of water is high.
D)the marginal utility of diamonds is relatively low.
E)the marginal utility of diamonds is greater than the marginal utility of water.

Question

Quizplus · Accepted Answer

The high price of diamonds compared to water is due to the higher marginal utility of diamonds, as they are rarer and more valued per unit than water, which is abundant.

The High Price of Diamonds Relative to the Price of Water