Identifying Misconceptions in Economic Goods Classification

Steps:

• Recall definitions: Demerit goods cause harm with imperfect information; free goods have zero opportunity cost; public goods are non-excludable and non-rivalrous; private goods are rivalrous and excludable.
• Evaluate A: Demerit goods like addictive drugs involve negative externalities from unawareness of full harm, making it correct.
• Evaluate B: Air is a free good as its abundance means no scarcity or opportunity cost in use, making it correct.
• Evaluate C and D: Public goods like national defense are non-rivalrous; private goods like doctor visits are rivalrous, so C incorrectly states rivalry.

Why C is correct:

• Public goods are defined as non-rivalrous, meaning one citizen's consumption does not reduce availability to others.

Why the others are wrong:

• A is correct: Addictive drugs are demerit goods due to users' unawareness of long-term damage.
• B is correct: Air has no opportunity cost as a non-scarce resource.
• D is correct: Doctor visits are private goods because they are rivalrous—one patient's use prevents another's.

Final answer: C