In Question 1.3, could using tolls instead of taxes to finance the bridge yield a Pareto improvement?
Question:
In Question 1.3, could using tolls instead of taxes to finance the bridge yield a Pareto improvement?
Question 1.3
A town council is considering building a new bridge over a small river that runs through the town to reduce congestion on the existing bridge and decrease commuting times. Each of 1,000 commuters who must cross the bridge would experience a benefit of $15 per day from the reduction in commuting time. The government would finance the bridge through increased property taxes that amount to $1 per day for each of the 10,000 households in the town. Would the bridge pass a costbenefit test? Would building the bridge be a Pareto improvement (relative to not having a bridge)?
Step by Step Answer:
Managerial Economics And Strategy
ISBN: 9780134899701
3rd Edition
Authors: Jeffrey M. Perloff, James A. Brander