Question
Please explain, with the aid of a diagram, the market failure that a congestion tax is addressing and how the tax may improve social welfare.
Please explain, with the aid of a diagram, the market failure that a congestion tax is addressing and how the tax may improve social welfare. ( Assume the tax increases the marginal cost per kilometre travelled).
consider situation below:
The Productivity Commission Report (2017) "Shifting the Dial: 5-year productivity review" Commission suggests that "without policy change, the avoidable social costs of congestion are expected to rise to at least $31.4 billion by 2030." In fact, cities such as London and Singapore have had congestion taxes for a number of years. Congestion pricing, where road tolls are higher during peak period compared with off-peak are aimed at reducing traffic in peak hours.
And here is the report
https://www.pc.gov.au/inquiries/completed/productivity-review/report/4-towns-cities
Thank you very much
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