2. A hot dog served at a private party A hot dog sold at a stand owned by the city government -------------------------_......_- Suppose the city ofRoadville is debating whether to build a new highway from its airport to the downtown area. The city surveys its citizens and fmds that, on average, each of the one million residents values the new highway at a value of $50 and the highway costs $40 million to construct.

a. b.

c. d.

e. Assuming the survey was accurate, is building a new highway efficient? Why or why not? Under what conditions would private industry build the road? Is it likely that private industry will build the road? Why or why not? Should the city build the road? On average, how much should it increase each resident's tax bill to pay for the road? . Is it certain that building the highway is efficient? That is, what are the prob lems associated with using cost-benefit analysis as a tool for deciding whether to provide a public good?