Look again at Solved Problem 5.3. Use the graph in the answer to part (b) to draw
Question:
Look again at Solved Problem 5.3. Use the graph in the answer to part (b) to draw a new graph to illustrate the answer to part (c). Make sure that your graph shows (i) the $2.75-per-ride tax, (ii) the optimal tax, and (iii) the demand curve for rides after the state government imposes the $2.75-per-ride tax.
Data given in Solved Problem 5.3
When you drive a car, you generate several negative externalities: You cause some additional air pollution, you increase the chances that other drivers will have an accident, and you cause some additional congestion on roads, causing other drivers to spend more time in traffic. The externalities may be particularly large in big cities. In 2019, the average speed of a car in midtown Manhattan in New York City was less than 5 miles per hour, about the same speed as someone jogging. New technology makes it possible to identify individual cars and track the routes they take. Beginning in 2019, the state of New York began using the technology to automatically bill any car from a ride-hailing service like Uber or Lyft a congestion fee, or tax, of $2.75 whenever the car traveled through midtown Manhattan.
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