The Price of Diamonds Is Substantially Greater Than the Price

question 21

Multiple Choice

The price of diamonds is substantially greater than the price of water because

• A)the total utility of water is greater than the total utility of diamonds.
• B)the total utility of diamonds is greater than the total utility of water.
• C)the marginal utility of the last diamond purchased is significantly greater than the marginal utility of the last gallon of water purchased by a typical person.
• D)the marginal utility of the last diamond purchased is significantly less than the marginal utility of the last gallon of water purchased by a typical person.

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Definitions:

Fair Value Through Profit

A financial accounting treatment where changes in fair value of assets or liabilities are recorded in the profit or loss for the period.

Short-Term Investments

Investments that are expected to be converted into cash within one year and are often seen in the form of stocks, bonds, or certificates of deposit held by a company.

Trading Investment

Securities purchased by a company not for long-term holding but rather for generating profit from short-term price fluctuations.