Question

Kate and Leopold are quarreling over a proposed plan by the government to put a demand-based toll on all the interstate highways in the state. Such a toll fluctuates according to the demand for the right to drive in dedicated, high-speed lanes. For instance, on a 4-lane interstate, those driving in the right lane face no toll but those wishing to drive in the left lane pay a toll which depends on the time of day and general demand to drive in that lane. Kate is against the proposal, citing the tolls as unfair—favoring those with money at the expense of the less well-off drivers. Leopold believes the tolls are entirely fair—if someone is willing to pay more to drive faster, why shouldn’t they?

A mutual acquaintance, Stuart, advances the following compromise: put in a toll but cap it at a reasonable amount.

Based solely on the information given, who has the strongest economic argument for the efficient use of an interstate, Kate, Leopold, or Stuart? Choose one person’s argument and support your claim in under 1 page. Use economic surplus (primarily, consumer surplus) as the indication of efficiency (i.e., more surplus = greater efficiency).

Answer 1

Economically and socially the decision  to put a demand-based toll on all the interstate highways in the state is correct. This will led in the increase of govt. income as well as will help in division of road equally for slow lane and fast lane drivers which will avoid the accidents as most of the accidents happen because of the fast drivers to the slow drivers . Stuart's mutual acquaintance has the strongest economic argument for the efficient use of an interstate as when the price will be reasonable there more people will use the lane . At an high price very less people would be willing to use that lane which will have lesser economic gains , when the price will the reasonable more people will use that. When the price will be reasonable consumer's surplus will automatically be taken care of .

Following are the economic benefits of putting a toll :

1. increased employment

2. increase in govt. wealth

3. less no. of accidents