The Diamond-Water Paradox Occurs Because

question 124

Multiple Choice

The diamond-water paradox occurs because

• A)the price of a product is related to its total utility, not its marginal utility.
• B)the price of a product is related to its marginal utility, not its total utility.
• C)water is, in fact, very scarce in certain regions of the world.
• D)diamonds are more useful than water.

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Definitions:

Marginal Product

The additional output produced as a result of adding one more unit of a specific input, holding other inputs constant.

Total Product

The total output or production achieved by a firm with a given amount of resources.

Average Product

The output per unit of input, calculated by dividing the total product by the quantity of input, reflecting the efficiency of production.

Marginal Product

The additional output resulting from the use of one more unit of a particular input, holding other inputs constant.