Toll roads | microeconomics | keiser


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This week we are going to examine substitute goods, highways and a bit about how we pay for highways.  Video Private roads

Highway construction and maintenance are funded mainly by motor fuel taxes (the gasoline tax).  There is a federal gasoline tax (an excise tax) which is 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel fuel.  Then there are state taxes per gallon and, in some states, a sales tax as well as a gallonage tax.  For an overview of state motor fuel taxes go to the American Petroleum Institute’s Motor Fuel Taxes page.  Since only those who have vehicles pay the motor fuel tax, it is also called a User Fee.

The federal motor fuels tax goes into the Federal Highway Trust Fund (it also funds public transit) which is a major source of highway funding nationally.  However, as vehicles use less fuel because of higher mileage, the Trust Fund balance becomes insufficient to meet the infrastructure needs. The state highway trust funds are experiencing the same problems.  Thus, states are looking for other ways to fund new highways.

Which brings us to this week’s discussion topic: Toll Roads.

Assignment Summary:

  1. Watch the video above and read “In the News: The Case for Toll Roads” from Chapter 11 (pages 220-221)  Week 3.pdf Click for more options – the article is the same in both the 7th and 8th editions, just the art work is different.
  2. Also review the information on motor fuel taxes and the balance in the Federal Trust Fund using the links above.  You may wish to do a search for your state’s highway trust fund balance and motor fuel taxes.
  3. What are the advantages and disadvantages of toll roads for driver?  Why might an individual prefer to pay a toll than to use a free road?
  4. Are there other ways to pay for highways other than tolls or higher motor fuel taxes?  (Oregon is researching an alternative user fee system, you may wish to search for that information.)
  5. Are there environmental aspects to the use of toll roads versus free roads?
  6. Post your views to the discussion board and refer to at least two different concepts from this week’s Chapters. Your illustration of concepts MUST include an explanation why you think they are relevant to the week’s topic using specific information from the articles, videos and other research that you have done. accounting cost/economic costs Fixed and variable costs Cost curves How markets fail Negative externalities Price gouging

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