Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 11, Problem 9PA
To determine
The externality.
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Susan sees a classified ad from Raphael offering a used DVD player for $20. On the opposite page, she sees a big color ad from a national electronics chain offering a new DVD player for $175. Susan values a DVD player at $205 as long as it works, regardless of whether it is new or used.
Recently, the Metropolitan Transportation Authority (MTA) voted to pass a policy that
charges drivers who enter Manhattan (New York City) on the weekdays from 5am to 9pm,
and 9 am to 9 pm on the weekends.
Passenger vehicles (small cars) would be charged $15, trucks would be charged anywhere
from $24-$36 depending on size, and motorcycles would be charged $7.50.
During the other hours, the charges and tolls will be decreased.
Which of following statements is true?
The MTA believes the highest external cost of driving occurs after 9pm.
The MTA is subsidizing drivers in NYC.
The MTA believes that the external cost of trucks is greater than passenger vehicles and
motorcycles.
Currently (before the tolls go into effect), NYC has the socially optimum quantity of drivers.
What are your three choices for reducing the amount of time spent waiting in traffic? What distinguishes one from the other in terms of quality?
Chapter 11 Solutions
Essentials of Economics (MindTap Course List)
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