Q1. Suppose the government is considering an increase in the toll on a certain stretch of highway from $3 to $4. At present, 1 million cars per week use that highway stretch; after the toll is imposed, the number of cars per week will change according to its price elasticity of demand of -0.8 (this elasticity value is estimated based on the initial-value method). If the marginal cost of highway use is constant (i.e., the supply curve is horizontal) and equal to $3 per car, what is the net annual cost to society attributable to the increase in the toll? (your answer must be rounded off to the nearest million dollars per year, i.e., no decimal places; there are 52 weeks in a year)

Q1. Suppose the government is considering an increase in the toll on a certain stretch of highway from $3 to $4. At present, 1 million cars per week use that highway stretch; after the toll is imposed, the number of cars per week will change according to its price elasticity of demand of -0.8 (this elasticity value is estimated based on the initial-value method). If the marginal cost of highway use is constant (i.e., the supply curve is horizontal) and equal to $3 per car, what is the net annual cost to society attributable to the increase in the toll? (your answer must be rounded off to the nearest million dollars per year, i.e., no decimal places; there are 52 weeks in a year)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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