Suppose tax shares are evenly distributed for a particular service at the amount of $100.00 per person.Which taxpayer suffers a political externality based on the taxpayer's marginal benefit for the service?

Question

Quizplus · Accepted Answer

A political externality occurs when the cost or benefit of a policy is not evenly distributed among all taxpayers. In this case, if tax shares are evenly distributed at $100.00 per person, then taxpayer A's marginal benefit matches the cost they are paying for the service. However, taxpayer B's marginal benefit is greater than their cost of $100.00, and taxpayer C's marginal benefit is less than their cost of $100.00. Therefore, both taxpayer B and C are experiencing political externalities.

Suppose Tax Shares Are Evenly Distributed for a Particular Service