Final answer:
The toll is an example of a toll good, where users directly pay for a service available to all who can afford it. For maximum revenue, a city would set the toll in the inelastic portion of the demand curve, as quantity demanded is less responsive to changes in price.
Step-by-step explanation:
The toll Dwayne pays as he drives to work is an example of a toll good. Toll goods are similar to public goods in that they provide essential services and are available to all who can pay the fee. They differ from public goods, which are typically available to all without direct fees. Economists also classify cable TV and cellphone services as toll goods. Toll roads, specifically, are paid for by users directly in order to fund the construction and maintenance of the infrastructure. This is less efficient than other forms of tax because of the associated costs such as toll booth construction, staffing, and the impact on traffic. Nevertheless, they are a common way for states to generate revenue to offset these infrastructure costs.
In answering question 29, the city will likely decide to charge a toll in the inelastic portion of the demand curve, assuming the toll bridge has no close substitutes and drivers must cross it to reach their destinations. Inelastic demand means that a change in price (toll rates) will not significantly affect the quantity of the service demanded (the number of drivers crossing the bridge). Consequently, higher tolls can be charged without a substantial decrease in the number of drivers, maximizing the city's revenue.