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      Question

      The economic rationale for government provision of a

      Merit Good (e.g., education, healthcare) often rests on which concept?
      A The good is non-rival and non-excludable (Public Goods failure). Correct Answer Incorrect Answer
      B The good yields positive external benefits to society not fully internalized by the consumer. Correct Answer Incorrect Answer
      C The provision violates the Principle of Equal Marginal Sacrifice. Correct Answer Incorrect Answer
      D The demand curve for the good is perfectly elastic. Correct Answer Incorrect Answer

      Solution

      Solution: A Merit Good is a commodity that the government feels individuals should consume, often because it generates positive externalities. · Example (Education): An individual's education benefits society through a more skilled workforce, less crime, and a more informed electorate. Since individuals only consider their private benefit, they under-consume the good. · Government provision (e.g., subsidies or free public education) corrects this under-consumption by internalizing the positive externality, moving output closer to the socially optimal level.

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