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:

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

neither can be compared by measuring marginal utility.

mental health therapy due to its higher marginal utility per dollar of expenditure.

both programs, which have the same marginal utility per dollar of expenditure.

Answer 1

The answer is elective surgery due to its lower marginal utility per dollar of expenditure.

Step-by-step explanation:

Elective surgery or elective procedure (from the Latin: eligere, meaning to choose) is surgery that is scheduled in advance because it does not involve a medical emergency. Therefore, this is more logical ste, since these types of procedures are not urgent. This is in line with the diminishing marginal utility. The diminishing marginal utility is the reduced use or satisfaction that consumers derive from the consumption of each additional unit of a good or a service.