If Water Is Essential for Life, While Diamonds Are Not

question 41

Multiple Choice

If water is essential for life, while diamonds are not, then why is water cheaper than diamonds?

• A) Because the marginal utility of water is high but the total utility is low.
• B) Because the total utility generated by diamonds is larger than the total utility generated by water.
• C) Because most people do not understand their total need for water.
• D) Because water is abundant, the marginal utility of water is low, and price reflects marginal utility, not total utility.

---

Definitions:

Double-Declining-Balance

An accelerated method of depreciation where the asset's book value is decreased at double the rate of traditional straight-line depreciation.

Scrap Value

The expected financial return on an asset when it is sold after its useful life has ended.

Equipment

Tools or machines required for a specific task or operation, typically in industry, business, or sports.

Straight-Line Method

A method of calculating depreciation of an asset, which divides the difference between its cost and salvage value by the useful life of the asset.