Questions: Smith, who has 10,000, receives an extra dollar, as does Jones, who has 100,000. Smith receives more utility from the extra dollar than does Jones. This is an example of an interpersonal utility comparison. the law of diminishing marginal utility. the diamond-water paradox. a and b

The answer is the second one (B): the law of diminishing marginal utility.

Explanation for each option:

1. Interpersonal utility comparison: This refers to comparing the utility or satisfaction derived by different individuals from a certain amount of goods or money. While the scenario involves two different individuals, the key concept being illustrated is not about comparing their utilities directly but about how the utility changes with the amount of money they have.

2. The law of diminishing marginal utility: This economic principle states that as a person receives more of a good, the additional (marginal) utility from each additional unit of the good decreases. In this case, Smith, who has less money, derives more utility from an extra dollar than Jones, who has more money. This directly illustrates the law of diminishing marginal utility.

3. The diamond-water paradox: This paradox, also known as the paradox of value, involves the question of why goods that are essential to life (like water) are often cheaper than goods that are not essential (like diamonds). This concept is not directly related to the scenario described in the question.

4. a and b: While the scenario does involve two different individuals, the primary concept being illustrated is the law of diminishing marginal utility, not an interpersonal utility comparison.

Summary: The scenario where Smith, who has less money, receives more utility from an extra dollar than Jones, who has more money, is an example of the law of diminishing marginal utility.