"Because the price of a diamond is much greater than the price of a gallon of water, the consumer surplus from diamonds is greater than the consumer surplus from water." Is the previous analysis CORRECT? Explain your answer
What will be an ideal response?
No, the analysis is incorrect. The paradox of value points out the error. Diamonds are scarce, so they have a high price and a high marginal utility. Water is abundant, so it has a low price and a low marginal utility. But the total utility from water (vastly) exceeds that from diamonds and so the consumer surplus from water (vastly) exceeds that from diamonds.
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A firm's production function is the relationship between the factors of production and the resulting outputs of the production process
Indicate whether the statement is true or false
The due diligence process is
A) the process by which a firm chooses an investment bank. B) when an investment bank researches a firm's value. C) how an investment bank underwrites large issues. D) the review of a prospectus by the SEC.
The demand curve for the perfectly competitive industry normally slopes downward, unlike the perfect competitive firm. Why?
What will be an ideal response?
The claim that reducing deficits in an economy with high rates of unemployment will help even in the short run by improving confidence is called:
A) quantitative easing. B) fiscal stimulus. C) expansionary austerity. D) a credit crunch.