thank you 3 4 points Commute Modes Consider the following ta

thank you

3. (4 points) Commute Modes Consider the following table Marginal Benefit Increase inI Increase in Volume ofTrip Time Travel Time total TraveExternal Private Trip Social Trip Time Vehicles 200 400 600 800 1000 1200 1400 1600 1800 2000 er Driver Trip Cost Cost Cost n minutes 12.00 12.00 12.60 14.00 16.20 19.20 23.00 27.60 33.00 39.20 er 0.004 0.008 0.012 0.019 0.024 0.030 0.036 0.044 6.4 12.0 22.8 33.6 48.0 64.8 88.0 0.36 0.96 1.80 3.42 5.04 7.20 9.72 13.20 3.20 3.20 3.26 3.40 3.62 3.92 4.30 4.76 5.30 5.92 17.16 14.68 12.20 10.32 8.97 7.34 6.21 4.76 3.92 3.05 Given the External Trip Cost and Private Trip Cost columns, fill in the Social Trip Cost column above a. b. Absent any govemment intervention like a congestion tax, what will be the equilibrium volume of vehicles be when people make their decisions privately (i.e., on their own)? equilibrium volume of vehicles without intervention c. What is the socially optimal volume of rehicles?Briefly explain. socially optimal volume of vehicles d. Why does the privately determined equilibrium volume exceed the socially optimal volume? e. How much would a congestion tax imposed on each trip have to be to move them collectively from the private equilibrium volume seen in part (b) and the socially optimal volume of vehicles? No explanation is needed. size of congestion tax required to socially optimal volume

Solution

Ans 1)

Ans 2)

When Private Cost is considered then Private Costvequals Marginal Benefit when Volume=1600

Ans 3)

When social cost is considered then social cost equals Marginal Benefit when Volume =1200

Ans 4)

In Private Cost firms dont consider externalitie that affect societies hence output remains higher than that of social cost as social cost includes external cost which are ignored by private firms unless cost and price include external costs social optimum will never be achieved.

Volume of Vehicle	Trip Time	Increase in Travel Time / Driver	Increase in Total travel time	External Cost	Private Cost	Social Cost	MB
200	12	0	0	0	3.2	3.2	17.16
400	12	0	0	0	3.2	3.2	14.68
600	12.6	0.004	2.4	0.36	3.26	3.62	12.2
800	14	0.008	6.4	0.96	3.4	4.36	10.32
1000	16.2	0.012	12	1.8	3.62	5.42	8.97
1200	19.2	0.019	22.8	3.42	3.92	7.34	7.34
1400	23	0.024	33.6	5.04	4.3	9.34	6.21
1600	27.6	0.03	48	7.2	4.76	11.96	4.76
1800	33	0.036	64.8	9.72	5.3	15.02	3.92
2000	39.2	0.044	88	13.2	5.92	19.12	3.05