CA Foundation · Business Economics · Public Finance
Which of the following is an example of a merit good?
Subsidised school education is a merit good, because society values it more than individuals do and would otherwise under-consume it. Cigarettes are demerit goods, national defence is a pure public good, and luxury cars are ordinary private goods.
- ASubsidised school educationCorrect
- BCigarettes
- CNational defence
- DLuxury cars
Explanation
Merit goods are goods the government believes people under-consume, such as education and health care, so it encourages their use through subsidy or provision. Cigarettes are a demerit good. National defence is a pure public good, and luxury cars are ordinary private goods.
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