A research study estimates that the direct cost of constructing a bridge connecting two boroughs in a city is $10 million.The revenue from the tolls on the bridge is estimated to be $8 million.The dollar value of pollution from the construction is estimated to be $5 million but the dollar value of the benefit to the city's residents is calculated to be $20 million.The construction of the bridge is most likely to be undertaken by:
A)the government because the total benefits exceed total costs.
B)a private firm because the total benefits exceed total costs.
C)the government because revenues exceed costs.
D)a private firm because revenues exceed direct costs.
E)a private firm because the revenues exceed indirect costs.

Question

Quizplus · Accepted Answer

The total benefits ($20 million) exceed the total costs ($15 million), indicating a positive net gain for the city. Since the bridge is a public good that generates positive externalities, it is likely that the government, rather than a private firm, will undertake the construction. Additionally, the revenue from the tolls is not enough to cover the direct cost of construction, further suggesting that government intervention may be necessary.

A Research Study Estimates That the Direct Cost of Constructing