Question

Which of these statements about use fees for a highway is best?

A) A flat rate results in lower use by most individuals.
B) A flat rate results in higher use by most individuals.
C) A flat rate has no impact on use by most individuals.
D) A fee based on congestion results in higher use by most individuals.

Answer 1

The city should decide to charge a toll in the inelastic portion of the demand curve in order to raise revenue from tolls.

Step-by-step explanation:

The city should decide to charge a toll in the inelastic portion of the demand curve in order to raise as much revenue as possible from the tolls.

In the inelastic portion of the demand curve, the demand for crossing the bridge is relatively insensitive to changes in price. This means that even if the toll is increased, the demand for crossing the bridge will not significantly decrease, allowing the city to generate more revenue.