Question

In the provision of certain public goods, sometimes there are user fees associated with the consumption of the good or service. For example, a highway, which is typically open to all, may have a toll booth requiring users to pay a certain fee to travel on that road. A state park may require a nominal fee of $10 per day for you to visit. What is the rationale for these types of user fees? Explain your economic reasoning for why (or why not) these types of user fees make sound public policy.

Answer 1

The modern governments of the many nations welfare states and in order to increases the welfare of the people government spends huge funds in every sector of the economy. To do so it requires heavy funds or revenue the sources of the revenue are two types as follows.

• Tax Revenue the revenue collected through various taxation in the economy.
• Non Tax Revenue the revenues collected through various sources such as service charges, profits of the government-owned corporations etc.

The above case study shows various fees collected, It goes to the non-tax revenue source other revenue generation to the government. Such policy is desirable in order to carry out welfare activities.