Chapter 24, Problem 4DQ

To determine

The justified hourly wage to compensate the toll equal to $5. The comparison of the wage with the average hourly earnings in the U.S. and prediction of average price and age of single-occupant cars in hot lane versus such car in other lanes on the same road.

Concept introduction:

Congestion:

Congestion is defined as the slow movement of vehicles or traffic jams on the road due to large numbers of vehicles at the same time.

Toll:

The toll is defined as the tax or the fee collected from the vehicle’s driver for using the roads, in order to maintain them in better condition and control congestion.

Explanation:

Given,

Toll is $5.

Amount of saved time is 6 minutes.

Hence, the total justified hourly wage to compensate the toll equal to $5 is $50 $\left(\frac{\$5}{6\text{minutes}}\times 60\text{minutes}\right)$.

• This means that the hourly wage is $50 which is the amount paid as toll tax to save 1-hour wage. The average wage rate in the private sector is $26. This is half of the total cost that is incurred for toll. This means that the person whose hourly income is $26 will not travel on the lane with toll.

• This conveys that the average price of the car in the hot lane is very high as compared to another lane.

• The car commuting in the hot lane is new as compared to the other lane because he cares more for his car than the congestion and traffic. He is also not worried about the earnings foregone in the office.