Q. Consider the following statements regarding merit goods:

1. Merit goods are characterised by nonrivalry and non-excludability in consumption.
2. The social benefit resulting from merit goods/services is much greater than the sum of private benefits to individual consumers.

Which of the above statements is / are correct?
Answer: Only 2
Notes: Merit goods create positive externalities, so their social benefits exceed individual (private) benefits. However, unlike pure public goods, merit goods are not necessarily nonrival or non-excludable. Education and healthcare, for example, can be excludable or rival. Thus, only statement 2 is correct, while statement 1 incorrectly defines merit goods as public goods.