If the government were to provide free health care, people would most likely consume this service until the marginal utility of the last unit was _____

Economics Dec 15, 2020

If the government were to provide free health care, people would most likely consume this service until the marginal utility of the last unit was _____.

a. equal to 1

b. greater than 1

c. equal to 0

d. less than 1

Expert Solution

The answer is c).

People would consume healthcare as long as the marginal benefit is larger than the marginal cost. Since health care is provided as a public good by the government, the marginal cost is zero (Note, this does not mean health care is free to individuals, as they are financed by taxes. Instead, it means that you don't have to pay your next doctor's visit). Therefore, as long as the marginal benefit is greater than zero, people will continue to consume healthcare, until the marginal benefit reaches zero.

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