Healthcare as a Merit Good

Steps:

• Recall economic classifications of goods based on consumption benefits and market failures.
• Identify merit goods as those with positive externalities where private consumption is below socially optimal levels.
• Analyze healthcare: it provides widespread societal benefits like reduced disease spread, justifying government intervention.
• Match to options: healthcare fits merit goods due to underconsumption without subsidies.

Why C is correct:

• Merit goods are defined as items society values more than market prices reflect, often subsidized to increase access; healthcare exemplifies this via public funding for broad health benefits.

Why the others are wrong:

• A: Demerit goods cause negative externalities and are overconsumed (e.g., alcohol), unlike healthcare's positive effects.
• B: Free goods have zero opportunity cost (e.g., air), but healthcare requires resources and payment.
• D: Public goods are non-excludable and non-rivalrous (e.g., street lighting), while healthcare can be rationed and rivals resources.

Final answer: C