Question

The economic rationale for government provision of a

Q: Answer-The economic rationale for government provision of a Merit Good (e.g., education, healthcare) often...

Solution A Merit Good is a commodity that the government feels individuals should consume, often because it generates positive externalities. Example Education An individuals 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.

Merit Good (e.g., education, healthcare) often rests on which concept?

A The good is non-rival and non-excludable (Public Goods failure).

B The good yields positive external benefits to society not fully internalized by the consumer.

C The provision violates the Principle of Equal Marginal Sacrifice.

D The demand curve for the good is perfectly elastic.

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