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    Public Financing: Cost-Benefit Analysis to Motorists

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    Suppose a proposed new road to be constructed between two cities will lower the average cost per trip by car from $5 to $4. Currently, 500,000 trips are made between the two cities per year. An estimate indicates that, all other things being equal, the new road will increase the number of trips per year to 600,000. Calculate the annual benefits to motorists of the new road as based on their willingness to pay.

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    Solution Summary

    The solution determines the cost-benefit analysis to motorists.