Suppose the Utah State Government wants to limit car congestion in the Cottonwood Canyons and considers implementing a toll. An independent policy center estimates that the average cost to society of an additional car on a canyon road is $2.00. The demand for access to a canyon road is

P= 402Q

whereQis the number of cars per hour andPis the price of a toll on the road.

(a) (When there is no toll, how many cars drive on a canyon road per hour?

(b) How much should the government charge each car at a toll booth if they want to implement a Pigouvian tax?

(c) How many cars drive after the Pigouvian tax (i.e., toll) is implemented?

(d) What is the deadweight loss associated with the tax? Here, like usual, I am asking about the loss in consumer and producer surplus from driving, not taking into account the social benefits from less congestion.

(e) What is the change in social costs associated with the tax?

(f) Do you recommend that the Utah state government implement the Pigou- vian tax?