Explain the difficulty with applying the benefits principle and ...

[swpotter12]

Explain the difficulty with applying the benefits principle and give examples.
 
  What will be an ideal response?

Question 2

Refer to Figure 5-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S1 represent?
 
  A) the market supply curve reflecting marginal social cost
  B) the market supply curve reflecting implicit cost
  C) the market supply curve reflecting external cost
  D) the market supply curve reflecting marginal private cost

[adf223]

Answer to Question 1

The difficulty is that many of the public expenditures are for public goods  national defense, weather satellites, etc. The benefits of public goods fall collectively on all members of society, and there is no way to determine what value individual taxpayers receive from them.

Answer to Question 2

D

[swpotter12]

Excellent

[amcvicar]

Gracias!