The city of Animaltown plans to build a new bridge across the river separating the two halves of the city for use by its residen
ts. It is considering two plans for financing this bridge. Plan A calls for the bridge to be paid for out of tax revenues, allowing anyone to use the bridge freely. Plan B calls for imposing a toll of $6 for crossing the bridge, with the remainder of the cost to be paid out of tax revenues. City planners estimate a local demand curve for hourly use of the bridge to be Q = 1,800 – 100P. The bridge will be able to accommodate 2000 cars per hour without congestion. Which of the plans is more efficient, and why? How would your answer change if congestion was predicted on the bridge?
1 answer:
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Answer:
C. a movement down along the supply curve for that good.
Explanation:
A decrease in price would lead to a decrease in the quantity supplied and a movement down along the supply curve.
This is in accordance to the law of supply which says the higher the price, the higher the quantity supplied and the lower the price, the lower the quantity supplied.
