The Following Data Show the Relationship Between the Number of Drivers

question 9

Multiple Choice

The following data show the relationship between the number of drivers who leave for work at 8:00 a.m., their average commute time, and their marginal benefit of commuting. $$\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Number of Drivers } \\\text { Who Leave at } 8 \text { am }\end{array} & \begin{array} { c } \text { Average } \\\text { Commute Time }\end{array} & \begin{array} { c } \text { Marginal } \\\text { Benefit }\end{array} \\\hline 100 & 30 \text { minutes } & \$ 10 \\\hline 200 & 65 \text { minutes } & \$ 8 \\\hline 300 & 110 \text { minutes } & \$ 4 \\\hline 400 & 170 \text { minutes } & \$ 3 \\\hline 500 & 260 \text { minutes } & \$ 1 \\\hline\end{array}$$ If there is no charge to use the highway, then one would expect that ______ the socially optimal number of drivers will leave at 8:00 a.m. because ______.

• A)more; each driver's use of the highway imposes an external cost on other drivers by increasing the commute time
• B)more; the social marginal benefit of using the highway is greater than the private marginal benefit
• C)less; each driver's use of the highway imposes an external cost on other drivers by increasing the commute time
• D)less; the private marginal benefit of using the highway is greater than the social marginal benefit

---

Definitions:

Annual Net Income

The total profit of a company after subtracting all expenses from revenue for one year.

Net Present Value Method

A financial analysis technique that discounts future cash flows to present value to assess the profitability of an investment or project.

Economic Life

This term refers to the expected period during which an asset remains useful to the owner or is expected to generate economic benefits.

Initial Investment

Initial investment refers to the initial amount of money spent or committed to start a business venture, purchase capital assets, or invest in a project.