In London, any motorist entering a particular area in the city center during certain specified times must pay a congestion fee equal to £8, with fines for noncompliance rising to as high as £120. The congestion fee is:
A) a Pigouvian tax aimed at regulating the use of city streets, a common resource.
B) an attempt to internalize the costs of traffic delays and congestion.
C) the wrong policy tool for solving the problem of congestion; instead, motorists should be allowed to make deals to determine when and where they are permitted to drive.
D) a Pigouvian tax aimed at regulating the use of city streets, a common resource, and an attempt to internalize the costs of traffic delays and congestion.

Question

Quizplus · Accepted Answer

The congestion fee is both a Pigouvian tax, which is designed to regulate the use of a common resource (city streets), and an attempt to internalize the external costs associated with traffic delays and congestion.

In London, Any Motorist Entering a Particular Area in the City