Which of the Following Is a Merit Good

question 75

Multiple Choice

Which of the following is a merit good?

• A)Cigarettes.
• B)Food.
• C)Local telephone service.
• D)A computer operating system.

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Definitions:

Maturity

The final payment date of a loan or financial instrument, at which point the principal (and all remaining interest) is due to be paid.

Interest Rate Risk

The risk that changes in interest rates will adversely affect the value of an investment, particularly relevant for fixed-income securities.

Variable-Rate Assets

Assets that earn interest at rates which adjust over time based on prevailing market conditions.

Cash Equivalent

Short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value.