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3. In the simple model of congestion pricing: (a) Marginal social costs are below marginal private costs because the externality leads drivers to value the
3. In the simple model of congestion pricing: (a) Marginal social costs are below marginal private costs because the externality leads drivers to value the congested drive to work at a lower level. (b) Marginal private costs are below marginal social costs because drivers don't take account of the congestion cost they impose on other drivers. (c) With the congestion tax in place, drivers take too few trips because the charge is a kind of fiscal externality from the viewpoint of the drivers. (d) Congestion is actually likely to increase once the congestion charge is in place because the attrac- tiveness of the trip will have risen due to anticipated faster traffic flow. 4. In the case of congestion pricing in London, initial opposition to congestion pricing eventually ended up as strong support once it was actually implemented. The model of de Borger and Proost explained this as being due to: (a) Congestion pricing actually lowers total social welfare, contrary to promoters' claims, because it is government intrusion on free markets. (b) In the case they explore, all drivers lose because part of the social benefits spill over to non-drivers. (c) Enough of the benefits spill over to non-drivers that drivers taken together lose and individual drivers may be poorly informed about whether they themselves will lose. (d) The world is just crazy and people never understand things
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