Question

The government wants to make Medicare benefits available to more people, but to achieve this goal, it needs to make cuts in the existing Medicare budget. The two areas where they are considering cuts are nonessential elective surgery and 6-12 month mental health care programs. Applying the concept of diminishing marginal utility, the budget cuts should be made for spending on:A. elective surgery due to its lower marginal utility per dollar of expenditure.B. neither can be compared by measuring marginal utility.C. mental health therapy due to its higher marginal utility per dollar of expenditure.D. both programs, which have the same marginal utility per dollar of expenditure.

Answer 1

Answer:

A. elective surgery due to its lower marginal utility per dollar of expenditure.

Explanation:

As there is non essential elective surgeries, as from government's point of view since it is non essential that is not required and not utilized by major citizens of the country, and since there is requirement of budget cut-down. The government shall remove elective surgery.

as the amount of expenditure involved in these surgeries is also high and the resulting utility for each surgery is really low, it shall be removed.