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 non-essential elective surgery and 6-12 month mental health care programs. Applying the concepts of diminishing marginal utility, the budget cuts should be made for spending on:Elective surgery due to its lower marginal return ratesMental health therapy due to its higher marginal return rateBoth programs, which have the same marginal return rateNeither can be compared by measuring marginal utility

Answer 1

Elective surgery due to its lower marginal return rates

Step-by-step explanation:

In the given instance it is provided that the government wants to increase the reach of medicare benefits to more people. Also for achieving this it has to decrease the current expenditure.

As it is clear that the benefits from elective surgery in terms of utility are not equivalent to the proportional amount spent on such surgeries in terms of dollar, then the surgeries do not stand to provide effective results.

Accordingly such elective surgeries can be withdrawn.