Which of the following best explains why Jerry's \$20 payment in tolls for the Florida Turnpike is not considered a tax in microeconomics?

• A. Tolls are voluntary payments, while taxes are always involuntary.
• B. Tolls are used exclusively for road maintenance, while taxes are used for all government spending.
• C. Tolls are collected by private companies, whereas taxes are only collected by the federal government.
• D. Tolls are payments for a specific service, while taxes are compulsory payments to the government not directly tied to a specific benefit.

Answer: (D)

Verified step by step guidance

1. Understand the definition of a tax in microeconomics: a tax is a compulsory payment imposed by the government that is not directly linked to a specific service or benefit received by the payer.
2. Recognize that tolls are payments made specifically for the use of a particular service or infrastructure, such as a road or bridge, meaning the payer receives a direct benefit from the payment.
3. Contrast the nature of tolls and taxes by noting that tolls are user fees tied to a specific service, whereas taxes are broader compulsory payments used to fund various government activities without a direct link to individual benefits.
4. Analyze why Jerry's \$20 payment is a toll and not a tax by identifying that it is a payment for a specific service (using the Florida Turnpike), which aligns with the concept of a user fee rather than a general tax.
5. Conclude that the key distinction lies in the direct exchange of payment for a service in the case of tolls, versus the compulsory and non-specific nature of taxes, which justifies why Jerry's payment is not considered a tax.