Assignment:
Please read and summarize the handouts. After reading the handouts, please answer the following questions:
1. The principle rule of economic efficiency requires that the marginal benefit equal marginal cost. For services that primarily benefit the direct consumer such the use of public facilities, license taxes or fees or property taxes paid by direct consumers, the price charged should equal marginal cost. Why do you think this makes economic sense? In your response make sure you mention the types and use of user charges?
2. What are the economic effects of intergovernmental grants?
Readings:
1. Pricing of government goods user charges
By selma j. Mushkin and richard m. Bird
2. Intergovernmental grants
By george f. Break