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Could you help me with the following primary and secondary market question? Question Imagine a policy that increases the toll on a highway from $0.40

Could you help me with the following primary and secondary market question?

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Imagine a policy that increases the toll on a highway from $0.40 to $0.50 and would reduce the use of the highway by 10,000 cars per week.

(a) Because of the reduced use of the highway, demand in the secondary market for train rides increases by 20,000 passengers per week (at any price level). Assuming that the price of train rides is set equal to the marginal cost of operating the train and marginal costs are constant at $1.5 (i.e., the supply schedule is horizontal), and no externalities result from the reduced use of the highway and the increased use of the train system, are there additional costs or benefits due to the increased demand for train rides? Why or why not? If additional costs or benefits exists, how large are they?

(b) Because of the reduced use of the highway, demand in the secondary market for gasoline falls by 30,000 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 (i.e., 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? Why or why not? If additional costs or benefits exists, how large are they?

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