Question

In 350 words, One policy issue that local governments must resolve is whether to price a service so that it recovers all or only a portion of its costs. The common practice is to recover only a portion of the cost through service charges with the remainder subsidized by general revenues. Some of the pricing strategies available to local governments as referenced in the text include full-cost and return-on-investment pricing, partial-cost pricing, competitive pricing, and marginal-cost pricing. Discuss which pricing strategy you believe to be the most efficient and effective and why?

Answer 1

In any public sector the government revenue is always on taxes where as the government even implement policies for their people by adopting subsidies for those taxes paid.In any state body or local governments the best price stratergies in public sector are marginal cost pricing.

Marginal cost pricing is the price stratergy where they set the price of a product for extra cost of producing a unit output.

The main principle of this marginal cost is collecting the amount by adding the extra cost and leving taxes and than subsidize the product thus making there policies go into public and collect the require amount of for the state revenue in form of taxes. Thus this the tactic which the local governmenets follows only on products where they can fix prices.

But there is difficulty in fixing price for the products because if the price of product goes high there will be a problem with people. So they should estimate the values thus making it both beneficial government and people.