ECONOMICS
MARKET FAILURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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private benefits exceed their social benefits.
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social benefits exceed their social costs.
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private costs exceed their private benefits.
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social benefits exceed their private benefits.
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Detailed explanation-1: -In addition to public goods there is another category of goods, called merit goods, that, although they are private goods, generate strong positive externalities when they are consumed.
Detailed explanation-2: -The concept of merit goods assists governments in deciding which public or other goods should be supplied. Merit goods are commodities that the public sector provides free or cheaply because the government wishes to encourage their consumption.
Detailed explanation-3: -Unlike in the case of pure public goods, the merit goods are not provided to the entire society; rather they are given to certain targeted people. The government here believe that the deserving people may under-consume such goods and hence provides these to them at low cost or no cost.