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Author Question: Make an argument for user charges being both efficient and equitable. What information can user ... (Read 216 times)

mckennatimberlake

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on: Jul 1, 2018
Make an argument for user charges being both efficient and equitable. What information can user charges provide us that free provision can not?
 
  What will be an ideal response?

Question 2

A horizontal demand curve for a good could arise because consumers
 
  A) are irrational.
  B) are not sensitive to price changes.
  C) view this good as identical to another good.
  D) have no equivalent substitutes for this good.


Edwyer

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Reply #1 on: Jul 1, 2018
Answer to Question 1

User charges can be considered equitable from the benefit principle of taxation since individuals have to pay in proportion to the benefits they receive from the good. From an efficiency perspective, user charges can be considered efficient because they act as a price for public sector output so they minimize the excess burden of taxation. Contrary to free public provision, user charges help give an idea of consumer demand for a good so that policymakers can provide the amount of the good in line with that revealed demand.

Answer to Question 2

C


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