After the implementation of the congestion tax in London, traffic volume was reduced and travel time for cars and buses was cut in half. This is an example of
A) responding to incentives.
B) the role of pricing in allocating resources.
C) caveat emptor.
D) comparative advantage.

Question

Quizplus · Accepted Answer

The congestion tax in London is an example of the role of pricing in allocating resources. By charging drivers for using the roads during peak hours, the government is able to reduce traffic volume and travel time for cars and buses. This is because drivers are now responding to the incentive to avoid paying the tax by driving at different times or taking different routes.

After the Implementation of the Congestion Tax in London, Traffic