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    Question

    The Benefit Principle of taxation is most closely

    associated with the financing of which of the following goods?
    A Defense (a pure public good). Correct Answer Incorrect Answer
    B Education (a merit good). Correct Answer Incorrect Answer
    C Public parks with entrance fees (a club good). Correct Answer Incorrect Answer
    D Highways financed by gasoline taxes and tolls. Correct Answer Incorrect Answer

    Solution

    Solution: The Benefit Principle suggests that individuals should pay taxes in proportion to the benefits they receive from government-provided goods and services. ┬╖ A classic example is the financing of public infrastructure, like roads and highways, through specific user charges such as gasoline taxes and tolls. The more you use the highway, the more gas tax or tolls you pay, directly linking the payment to the benefit received. ┬╖ Pure public goods like Defense (A) are typically financed by the Ability-to-Pay principle due to the difficulty of metering individual benefit.

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