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

question 28

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

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Definitions:

Fixed Expenses

Costs that remain constant for a given period regardless of the level of production or sales, such as rent or salaries.

Variable Expenses

Expenses that change in proportion to the activity of a business.

Financial Advantage

A benefit gained in financial terms, which can result from factors such as cost savings, investment returns, or other monetary gains.

Outside Supplier

An external organization that provides goods or services to another company.