Explain the idea behind the benefits-received principle of ...

[MirandaLo]

Explain the idea behind the benefits-received principle of taxation and provide an example.
 
  What will be an ideal response?

Question 2

Identify whether each of the following transactions will take place in the factor market or in the product market:
 
  a. Shondra buys a Harley-Davidson Softail motorcycle.
  b. Aimee works 20 hours a week at a grocery store.
  c. Gustavo sells a warehouse to a produce delivery company.
  d. Ocean Spray increases employment at its Middleboro, Massachusetts plant.

[tjayeee]

Answer to Question 1

It is a theory of fairness which holds that taxpayers should contribute to government (in the form of taxes) in proportion to the benefits that they receive from public expenditures. The gasoline tax, paid by motorists, goes to the Federal Highway Trust Fund to build and maintain federal highways. The beneficiaries of public highways are thus taxed in rough proportion to their use of those highways.

Answer to Question 2

a takes place in the product market.
b, c, and d take place in the factor market.