Two roads go from Hereville to Thereville. One road is very wide and can easily accommodate all the traffic that would ever want to use it, but it is in poor repair and unpleasant to drive on. The other road is in excellent repair and goes through the most scenic areas, but it has only one lane in each direction and easily becomes congested.
a. Explain why, if there are sufficiently many drivers, both roads will be equally pleasant to drive on.
b. How do the private marginal benefits compare for a driver entering the wide road and a driver entering the narrow road? How do the marginal social benefits compare?
c. In view of your answer to part (b), could a social planner reallocate one car in order to make a welfare improvement?
d. How much further reallocation would the planner want to make? How could the same thing be accomplished without a planner?