1. Secondary Markets ['20 points}. Suppose the government is considering an increase in the toll on a certain stretch of highway from $0.40 to $0.50. At present, 50,000 cars per week use that highway stretch; after the toll is imposed, it is projected that only 45,000 cars per week will use the highway stretch. {3} {ID} Assuming that the marginal cost of highway use is constant {i.e., the supply curve is horizontal} and equal to $.40 per car, what is the social change in surplus attributable to the increase in the toll? (Him.- will the toll increase cause the supply curve or the demand curve to shift?) f? points) Because of the reduced use of the highway, demand in the secondary market for subway rides in creases. Assuming that the price of subway rides is set equal to the marginal cost of operating the subway and marginal costs are constant tie, the supply schedule is horizontal}, and no externalities result from the reduced use of the highway and the increased use of the subway, are there additional costs or benefits due to the increased demand for subway rides? Why or why not? {6 points} Because of the reduced use of the highway, demand in the secondary market for gasoline falls by 20,000 gallons per year. There is a stiff tax on gasoline, one that existed prior to the new toll. Assuming that the marginal cost of producing gasoline is $1 per gallon, that these marginal costs are constant tie, the supply schedule is horizontal}, that no externalities result from the consumption of gasoline, and that the gasoline tax adds 30 percent to the supply price, are there any additional costs or benefits due to this shift? If so, how large are they? II\"? points}