Suppose that the volume of traffic at which demand intersects private trip cost is 1000 cars...

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Suppose that the volume of traffic at which demand intersects private trip cost is 1000 cars and the 1000th car on the road slows the average car trip by 0.03 minutes. The volume of traffic at which demand intersects social trip cost is 800 cars and the 800th car on the road slows the average car trip by 0.02 minutes. The opportunity cost of car travel is $0.40 per minute. a) Compute the marginal external cost of travel at the market equilibrium. b) Compute the congestion tax (per trip) that would result in the socially efficient level of traffic. INSTRUCTIONS: Please type your answers in the space below. Show your work. Suppose that the volume of traffic at which demand intersects private trip cost is 1000 cars and the 1000th car on the road slows the average car trip by 0.03 minutes. The volume of traffic at which demand intersects social trip cost is 800 cars and the 800th car on the road slows the average car trip by 0.02 minutes. The opportunity cost of car travel is $0.40 per minute. a) Compute the marginal external cost of travel at the market equilibrium. b) Compute the congestion tax (per trip) that would result in the socially efficient level of traffic. INSTRUCTIONS: Please type your answers in the space below. Show your work.

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