We would expect the total utility of diamonds to be <u>lower</u> than the total utility of water and the marginal utility of diamonds to be <u>higher</u> than the marginal utility of water.
<u>Explanation:</u>
The diamond-water paradox presents the puzzling predictions: while water is definitely essential to human existence because without water life can not function, the water price is relatively low. Alternatively, diamonds are actually far less essential to human life, but diamond prices are considerably higher. Thus the effectiveness obtained from water is evidently very high while the utility extracted from diamonds is considerably less.
Here total utility is the aggregate satisfaction of desires and needs gathered from the consumption of a good while marginal utility is the additional satisfaction of desires and needs received from the consumption of one additional unit of good.
Answer: the correct answer is B. (i) and (iii) only
Explanation:
A natural monopoly is a monopoly in an industry in which huge infrastructural costs and other fences to entry relative to the size of the market give the largest supplier in an industry, often the first supplier in a market, an overwhelming advantage over potential competitors.
(i) multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. This is true but often times it is just one big company the one that serves the whole market or a partnership of two or (rarely) three companies that works as a big company.
(iii) a single firm can serve the market at the lowest possible average total cost. This is true because a natural monopoly has scale economies that's why it can offer the lowest possible average total costs.
I think the answer is 4 all of the above.
