The Buyer's Reservation Price for a Particular Good or Service

question 94

Multiple Choice

The buyer's reservation price for a particular good or service is the:

• A)smallest price the buyer would be willing to pay for it.
• B)same as the market price.
• C)largest price the buyer would be willing to pay for it.
• D)price the buyer must pay to ensure he or she gets it.

---

Definitions:

Diamond/Water Paradox

A paradox stating that (1) the things with the greatest value in use frequently have little or no value in exchange and (2) the things with the greatest value in exchange frequently have little or no value in use.

Value in Use

The utility of a product based on its ability to fulfill the needs of the user.

Value in Exchange

The worth of a good or service in comparison to other goods or services in the context of trade or commerce.

Marginal Utility

The extra pleasure or advantage gained from using an additional unit of a product or service.