2024 – Recall exercise 2 from Chapter 4 in which an increase in the toll on a highway from 40
Assignment – 2024
2024 – Recall exercise 2 from Chapter 4 in which an increase in the toll on a highway from 40.
Recall exercise 2 from Chapter 4 in which an increase in the toll on a highway from $.40 to$.50 would reduce use of the highway by 10,000 cars per week.
a. Because of the reduced use of the highway, demand in the secondary market for sub-way rides increases. Assuming that the price of subway rides is set equal to the marginal cost of operating the subway and marginal costs are constant (i.e.
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b. Because of the reduced use of the highway, demand in the secondary market for gasoline falls by 30,000 gallons per year. There is a stiff tax on gasoline, one that existed prior to the new toll. Assuming that the marginal cost of producing gasoline is $1 per gallon, that these marginal costs are constant (i.
e.
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