The town of Penrith in western Sydney is debating whether to build a new motorway from its new airport to the city centre. The city surveys its citizens and finds that, on average, each of the one million residents values the new highway at a value of $20 and the estimated cost to construct the highway is $10 million.

a)Assuming the survey was accurate, is building a new motorway efficient?Briefly explain.

b)Briefly discuss under what conditions would private industry build the road?

c)Should the town of Penrith build the road? On average, how much should it increase each resident's tax bill to pay for the road?

d)Is it certain that building the motorway is efficient? That is, what are the problems associated with using cost-benefit analysis as a tool for deciding whether to provide a public good? Briefly discuss.