c) What determines the efficient amount of expressway maintenance and what might lead to underprovision or overprovision of maintenance?
d.How would you expect Toronto's population growth to influence the marginal social benefit from the Gardiner Expressway?
e.Illustrate your answer to part (d) by drawing a version of Fig. 2 on p. 389 that shows the effect of an increase in the population.
ECONOMIC ANALYSIS I Canada's road transportation infrastructure is constructed and maintained by all levels of government. Toronto's Gardiner Expressway was constructed and is maintained by the City of Toronto. To maintain any highway requires continuous repairs and eventually major refurbishment or replacement. The Gardiner Expressway was constructed 60 years ago and is undergoing a major overhaul. The City of Toronto considered a variety of proposals that include tearing down the Gardiner and replacing it with either a surface or tunnel expressway. The City government decision was to undertake major repairs that cost $3.6 billion. You can explain the problem of expressway maintenance and Mayor Tory's support for the complete repair of the Gardiner by using the tools you've learned in this chapter. In Fig. 1,the xaxis measures the number of kilometres of expressway repaired and the yeaxis measures the marginal benet and cost of repairs. All the numbers are assumpe tions but calibrated to the Toronto numbers. The MSC curve shows the marginal social cost of repairing a kilometre of expressway and the M58 curve shows the marginal social benet. If the city allocated only $2 billion to the Gardiner project; only 12 kilometres of the expressway could be repaired. Given the (assumed) M55 and MSC curves, the efficient quantity is 18 kilometres. Because the number of kilometres repaired is less than the efficient quantity, 3 deadweight loss arises. The efficient use of resources occurs, shown in Fig. 2, when all 18 kilometres of the Gardiner are repaired at a cost of $0.2 billion per kilometre, with a total expenditure of $3.6 billion, Comparing the outcomes in Fig. i and Fig. 2, a political party can propose an expressway repair and tax program that achieves an efcient outcome. The efficient size of the repair project is paid for by the people who benet from the restored expresswayits userseby a road toll. A road toll set at the efficient level would both pay for the repairs and provide an incentive for people to use public transit and ease congestion on the expressway. .0 t.) O MSC ki lomeire) .0 to w MSB Benefit and cost [billions of dollars per (110 Efficient 5 quantity 0 6 12 l B 24 3O 36 Expressway (kilometres replaced} Figure 'l Underprovision of Expressway .0 (a O MSC kilometre} .0 m \\l Benefit and cost (billions of dollars per MSB Efficient qua niity 5 O o i 2 i 8 24 30 36 Expresmoy {kilometres replaced} Figure 2 Efcient Provision of Expressway 389
