Explore BrainMass

Explore BrainMass

    Achieving efficiency and pure public good

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Indicate whether you agree with the following statement, and give your reasons for doing so:

    "If the beltline surrounding the city of Raleigh were a pure public good, efficiency would require that the price use the road be zero. However, during rush hour congestion, the road cannot be regarded as a pure public good and a toll should be charged for its use."

    If an automated vehicle identification system (AVI) were established for residents of the metropolitan area around Raleigh who use the beltline, how would you set tolls to achieve efficient use of the road? The AVI system would allow you to send a bill to each user of the road each month based on miles traveled on the road and the price you charge, which could vary by time of day.

    © BrainMass Inc. brainmass.com March 4, 2021, 11:43 pm ad1c9bdddf

    Solution Preview

    Achieving Efficiency and Pure Public Good:

    I agree with the statement because pure public goods cannot be confined only to the individuals who have paid to get the services. The efficiency would require that the prices to use the road be zero because there is no congestion on the roads. The marginal cost of providing a public good at a greater level is positive and that the marginal cost is zero if other people benefit from the pure public good (Public goods, n.d). The road cannot be regarded as a pure public good and that a toll should be charged for using the road because all the consumers cannot benefit from using the road when the road is congested (Hyman, 2004).

    The services of the road should be priced according to the imposed marginal cost. The road becomes a public good because the marginal social cost falls to zero and that not all the consumers will benefit from the use of the road. ...

    Solution Summary

    The following posting discusses the use of an automated vehicle identification system.