Exhibit 5-1
Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the government decides to set the money price of driving on the freeway at zero, but builds more freeways to eliminate the shortage of freeway space at 8 a.m. Graphically, the result of the increase in freeway space would be shown by

Question

Exhibit 5-1 
Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Suppose that the government decides to set the money price of driving on the freeway at zero, but builds more freeways to eliminate the shortage of freeway space at 8 a.m.  Graphically, the result of the increase in freeway space would be shown by

Quizplus · Accepted Answer

If the government builds more freeways to eliminate the shortage of freeway space at 8 a.m., the supply of freeway space will increase. This will be shown graphically by shifting the supply of freeway space curve rightward. The demand curve will remain the same since the money price of driving is set at zero. Therefore, the equilibrium point will move to the right, resulting in a higher quantity of freeway space supplied and a lower quantity demanded at 8 a.m.

Exhibit 5-1 Refer to Exhibit 5-1, Which Shows Supply and Demand for and Demand