TutorOn by Sanath Withanage

Question:

A merit good is a good which
(1) benefits both the recipient and society as well.
(2) does not have a social cost in production.
(3) private benefits of consuming the good exceed its social benefits.
(4) cannot be supplied through market forces.
(5) can be supplied efficiently through market forces.

Correct Answer:

(1)

Answer Explanation:

A merit good (like education or healthcare) is a private good that generates positive externalities in consumption. This means that consuming it benefits the individual recipient directly, but it also creates “spillover” benefits that positively impact the broader society.

Topic: Market Failure Year: 2019