Consumers allocate their resources based on the ______?

A. Law of diminishing marginal utility
B. value in use and value in exchange principle
C. Law of returns to scale
D. Diamond and water paradox

Correct Answer:

Option B – value in use and value in exchange principle

Explanation

Value-in-exchange: It is the amount of goods and services which we may obtain in the market in exchange of a particular thing. In other words, it is the price of a particular good which can be sold and bought in the market.

Value-in-use is the net present value (NPV) of a cash flow or other benefits that an asset generates for a specific owner under a specific use.