A Variable Toll on a Road in Washington Reached a High

question 300

Multiple Choice

A variable toll on a road in Washington reached a high during the evening rush hour of $5.75. This toll bought the drivers who paid it a 27 minute time savings. Which of the following is correct?

• A)For some consumers, the toll was less than the opportunity cost of the time they would have spent in traffic.
• B)For some consumers, the toll was more than the opportunity cost of the time they would have spent in traffic.
• C)No consumers would find this toll worth the time saved in traffic.
• D)Both a and b are correct.

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Definitions:

Economic Losses

Situations where total costs exceed total revenues, indicating that resources may be better utilized elsewhere.

Average Variable Cost

The total variable costs (costs that change with the level of output) of production divided by the quantity of output produced.

Short Run

A time period in which at least one input is fixed and cannot be changed by the firm, affecting its production decisions.

Purely Competitive Market

Another term for a perfectly competitive market, emphasizing its features like a large number of small firms and identical products.