Which of the following statements is FALSE, with respect to what economist Adam Smith called the diamond-water paradox?
A) The total utility of water greatly exceeds the total utility derived from diamonds.
B) Total utility does not determine what people are willing to pay for a unit of a particular commodity; marginal utility does.
C) The demand for water is much smaller than the demand for diamonds.
D) There are relatively few diamonds, so the marginal utility of the last diamond consumed is relatively high.

Question

Quizplus · Accepted Answer

The diamond-water paradox highlights that even though water is more essential and has a higher total utility than diamonds, diamonds are priced higher due to their scarcity and the higher marginal utility of the last unit consumed. The demand for water is actually much larger than the demand for diamonds, not smaller, due to its essential nature for life.

Which of the Following Statements Is FALSE, with Respect to What