The diamond/water paradox can be explained by
A) water having a low price relative to diamonds.
B) water having high total benefits relative to diamonds.
C) water having higher marginal benefits in the summer than in the spring.
D) distinguishing between total benefits and price.
E) distinguishing between total benefits and marginal benefit.

Question

Quizplus · Accepted Answer

The diamond/water paradox is explained by distinguishing between total benefits and marginal benefit. While water has a high total benefit due to its necessity for life, its marginal benefit is low because it is abundant. Diamonds, on the other hand, have a high marginal benefit due to their rarity, despite their lower total benefit compared to water. This distinction helps explain why diamonds are priced higher than water.

The Diamond/water Paradox Can Be Explained by