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?
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.
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Refer to Figure 22-3. Technological change is shown in the figure above by the movement from
A) B to E. B) B to D. C) B to C. D) B to A.
In a monopolistically competitive market
A) firms are price setters. B) barriers to entry are high. C) firms earn positive economic profit in the long run. D) products are undifferentiated.