Suppose the government is considering an increase in the toll on a certain stretch of highway from $.20 to $.40. At present, 80,000 cars per week use that highway stretch; after the toll is imposed, it is projected that only 75,000 cars per week will use the highway stretch. Assuming that the marginal cost of highway use is constant (i.e., the supply schedule is horizontal) and equal to $.20 per car, what is the change in social surplus attributable to the increase in the toll? (Hint: The toll increase will cause the supply schedule, not the demand schedule, to shift.) Calculate government revenues from the increased toll. A. $18,750 B. $37,500 C. $15,000 D. $1000
Suppose the government is considering an increase in the toll on a certain stretch of highway from $.20 to $.40. At present, 80,000 cars per week use that highway stretch; after the toll is imposed, it is projected that only 75,000 cars per week will use the highway stretch. Assuming that the marginal cost of highway use is constant (i.e., the supply schedule is horizontal) and equal to $.20 per car, what is the change in social surplus attributable to the increase in the toll? (Hint: The toll increase will cause the supply schedule, not the demand schedule, to shift.) Calculate government revenues from the increased toll. A. $18,750 B. $37,500 C. $15,000 D. $1000
Chapter5: Supply, Demand, And Price: Applications
Section5.11: Application 11: College Super Athlets
Problem 2ST
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Suppose the government is considering an increase in the toll on a certain stretch of highway from $.20 to $.40. At present, 80,000 cars per week use that highway stretch; after the toll is imposed, it is projected that only 75,000 cars per week will use the highway stretch.
Assuming that the marginal cost of highway use is constant (i.e., the supply schedule is horizontal) and equal to $.20 per car, what is the change in social surplus attributable to the increase in the toll? (Hint: The toll increase will cause the supply schedule, not the demand schedule, to shift.)
Calculate government revenues from the increased toll.
A. $18,750
B. $37,500
C. $15,000
D. $1000
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