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lec5fred - Congestion Pricing P with toll no congestion P...

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Congestion Pricing Q 2 Q 5 MAX Q 4 Unstable Q 1 L M F C D E I H K (assumes inconvenience is class neutral N Equilibrium with economist’s toll Equilibrium without toll P = $ per mile plus inconvenience P with toll, no congestion P with economist toll A B G (theoretical and political reasons) Q 3 Without congestion
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Economist Case Tolled = Q2 Tolled off = Q2 - Q1 P with toll, no congestion P with economist toll Q 5 MAX Q 4 Unstable Q 1 Equilibrium without toll Q 2 Equilibrium with economist’s toll Q 3 Without congestion L M F C D E G B A I H K Toll Revenue N Congestion Cost Lost Consumer Surplus P = $ per mile plus inconvenience (assumes inconvenience is class neutral (theoretical and political reasons)
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Toll too high (no congestion) Q 2 Equilibrium with economist’s toll Q 3 Without congestion Tolled = Q3 Tolled off = Q1 - Q3 Increment tolled off = Q2 - Q3
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