D. Consider a ten-mile expressway. During rush-hour the equilibrium traffic is 2000 cars. Theaverage private cost of the trip is $5 at the equilibrium traffic level. The marginal social cost ofthe trip is $9 at the equilibrium traffic level. The efficient traffic level is 1500 cars. The averageprivate cost of the trip is $4 at the efficient traffic level. The marginal social cost of the trip is $7at the efficient traffic level.a. Which traffic volume has a higher average trip speed? Why?3b. What is the externality cost per car at the equilibrium traffic level? What is the externalitycost per car at the efficient traffic level? Explain.c. What is the level of the deadweight loss on this highway when it is in equilibrium?d. What is the efficient congestion toll on this highway?e. If the average fixed cost for expanding the highway is $2, should the state expand thehighway? Explain.

(Note: Since there are multiple parts, only the first three have been solved). In free market…

a. Which traffic volume has a higher average trip speed? b. What is the externality cost per car at the equilibrium traffic level? What is the externality cost per car at the efficient traffic level? Explain. са c. What is the level of the deadweight loss on this highway when it is in equilibrium?

a. Which traffic volume has a higher average trip speed? b. What is the externality cost per car at the equilibrium traffic level? What is the externality cost per car at the efficient traffic level? Explain. са c. What is the level of the deadweight loss on this highway when it is in equilibrium?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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