The High Price of Diamonds Relative to the Price of Water

question 107

Multiple Choice

The high price of diamonds relative to the price of water reflects the fact that,at typical levels of consumption,

• A)the total utility from water is relatively low.
• B)the total utility from diamonds is relatively high.
• C)the marginal utility from water is high.
• D)the marginal utility from diamonds is relatively low.
• E)the marginal utility from diamonds is greater than the marginal utility from water.

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Definitions:

Donor's Adjusted Basis

The original value of an asset for tax purposes, adjusted for factors such as depreciation or improvements, used to determine gain or loss on a gift's transfer.

Donee

The recipient of a gift or donation, often referenced in the context of tax deductions for charitable contributions.

Amount Realized

The total sum received from a sale or transaction after accounting for all expenses and liabilities.

Basis

Basis refers to the amount of investment in something for tax purposes, usually the cost of acquiring an asset.