In London, Any Motorist Entering a Particular Area in the City

question 65

Multiple Choice

In London, any motorist entering a particular area in the city center during certain specified times must pay a congestion fee equal to £8, with fines for noncompliance rising to as high as £120.The congestion fee is:

• A)an example of a Pigouvian tax aimed at regulating the use of the common resource of city streets.
• B)an attempt to internalize the costs due to traffic delays and congestion that are created by drivers in the specified area.
• C)the wrong policy tool for solving the problem of congestion; instead, motorists should be allowed to make deals to determine when and where individuals are permitted to drive.
• D)an example of a Pigouvian tax aimed at regulating the use of the common resource of city streets and an attempt to internalize the costs due to traffic delays and congestion that are created by drivers in the specified area.

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Definitions:

Compounded Semi-Annually

Interest calculation method where the interest is added to the principal sum twice a year, causing the interest to earn interest.

Strip Bond

A type of bond where the principal and regular coupon payments have been separated and are sold individually as zero-coupon bonds.

Interest

The cost of borrowing money, typically expressed as a percentage of the borrowed amount, paid by the borrower to the lender.

Effective Rate

The actual interest rate of an investment or loan when the compounding frequency is accounted for, giving a true reflection of the cost or yield.