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Question 1 There are 120 commuters in the city . The inverse demand for traveling on the highway is D(T) = 120 - T. This
Question 1 There are 120 commuters in the city . The inverse demand for traveling on the highway is D(T) = 120 - T. This function tells us the marginal benefit (measured in dollars ) of adding another vehicle to the road when there are already T vehicles on the road . If 7 people are using the highway , travel times (measured in minutes ) are M (T) = 7. Everyone values their time at 2 dollars per minute a) Why might the marginal benefit of using the road differ across people ? b) Derive the social marginal cost curve . c) When there is no toll , what are the equilibrium quantity of highway users quantity of alternative -route users . total cost of commuting for highway users . total cost of commuting for alternative -route users . total cost of commuting Show these quantities on a graph d) When the toll is set to maximize social welfare , what are the equilibrium quantity of highway users . quantity of alternative -route users total cost of commuting for highway users . total cost of commuting for alternative -route users . total cost of commuting toll toll revenue Show these quantities on a different graph e) Can you tell me , for each individual , how much better or worse off they are after the introduction of the toll ? Is there enough toll revenue to compensate for their loss in welfare
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