1. The following table shows the marginal benefit of roads per year (in dollars) to two types of households that re...

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1. The following table shows the marginal benefit of roads per year (in dollars) to two types of households that reside in a

business economics

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Answer 1

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a. Roads are not public goods as the congested road are rival in consumption. Vehicles already stuck in traffic stops other vehicles from using the road.

Also with toll taxes roads becomes excludable meanibg only the onea who pay can use it.

b. Socially optimal number of roads is 3. As the roads will only be constructed till 50*MBa+75*MBb≥MC

50*60+75*80=3000+6000=9000≥ 7000

For 4 and 5 roads MC≥ 50*MBa+75*MBb so road cannot be constructed.

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Answer 2

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1. The following table shows the marginal benefit of roads per year (in dollars) to two types of households that re...

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