Consider an urban highway that is subject to traffic congestion. The average cost of travel per mile on that highway is (in cents): AC= 10 + +47, where Tis traffic volume per hour, measured in 100s of vehicles per hour. For example, if T = 500 cars per hour, AC = 30 cents per mile. Assume that the demand for traffic per hour (during rush hour) is T = 46 – P, where P is the "price" paid by the driver. а. Assume that no congestion toll is imposed. Compute equilibrium Tand P. b. Assume that it is possible to impose the efficient congestion toll. Find the toll, and the efficient levels of T, P, and AC.

Consider an urban highway that is subject to traffic congestion. The average cost of travel per mile on that highway is (in cents): AC= 10 + +47, where Tis traffic volume per hour, measured in 100s of vehicles per hour. For example, if T = 500 cars per hour, AC = 30 cents per mile. Assume that the demand for traffic per hour (during rush hour) is T = 46 – P, where P is the "price" paid by the driver. а. Assume that no congestion toll is imposed. Compute equilibrium Tand P. b. Assume that it is possible to impose the efficient congestion toll. Find the toll, and the efficient levels of T, P, and AC.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter5: Supply, Demand, And Price: Applications

Section: Chapter Questions

Problem 8QP

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