Price Question

Q3. (Road Pricing} Suppose that the government would like to discourage certain percentage of private drivers from using their cars. Assume the following. (i) Currently, there are l' drivers. They all drive round-trip each day. (ii) Average driving time per one-way trip as a function of the number of drivers is given in Table 1. (iii) The distribution of monthly income for the current drivers is given in Table 2. (iv) The opportunity costs of driving per hour = 50% hourly salary during work. (v) Each driver in Table 2 works 160 hours per month. (vi) Choice of transport mode is only based on time and cost. (vii) lGas price and public transportation fare are ignored. (viii) Drivers only care about traveling time when deciding whether to drive. (ix) All drivers currently [i.e., before the congestion tax is imposed) save 18! minutes one-way by driving instead of taking public transportation. (x) If 25% of drivers stop driving, they will use subway. But that will cause more congestion in subway and the travel time in subway will increase by 3 minutes. Table 1. Number ofdrivers and avera_e drivin_ time. minutes 25a 3'30 _ 50f} 7'50 95f} _ l Table 2. Income distribution of the drivers. Monthl income 35