Question:
Which one of the following options distinguishes merit goods from public goods?
(1) Consumption reduces availability to others / Consumption does not reduce availability to others
(2) Provided at market price / Provided at cost recovery price
(3) Limited in supply / Have an infinite supply
(4) Generates positive externalities / Generates negative externalities
(5) Provided by the government / Provided by private companies
Correct Answer:
(1)
Answer Explanation:
Merit goods (like healthcare or education) are rival in consumption—if one person uses a hospital bed, it reduces availability for others. Public goods (like a lighthouse) are non-rival; one person’s use does not diminish another’s.
Topic: Market Failure Year: 2023
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