The Fact That Diamonds Have a Much Higher Price Than

question 40

Multiple Choice

The fact that diamonds have a much higher price than water

• A) violates the rules of utility maximization because water is necessary for life.
• B) does not violate the rules of utility maximization because globally, fresh water is actually very rare.
• C) does not violate the rules of utility maximization because water's marginal utility is low.
• D) violates the rules of utility maximization because diamonds are not necessities.
• E) violates the rules of utility maximization because the consumer actually consumes a large amount of water.

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Definitions:

Simulation Heuristic

A cognitive heuristic where people determine the likelihood of an event based on how easily they can imagine it happening, influencing their perception of risks and outcomes.

Conformity

Going along with the crowd, that is, saying or doing whatever other people are doing.

Intentional Behavior

Actions that are performed with awareness and purpose towards achieving a specific goal.

Illusory Correlation

The tendency to overestimate the link between variables that are related only slightly or not at all.