If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, then an increase in tolls will result in
A)a decrease in total revenue.
B)a decrease in non-toll road usage.
C)an increase in total revenue.
D)an increase in toll road usage.

Question

Quizplus · Accepted Answer

If tolls on a toll road can be raised significantly before commuters will consider using a free alternative, then an increase in tolls will still result in an increase in total revenue because the demand for toll roads is relatively inelastic. Therefore, even if toll rates go up, people would still continue to use these roads, resulting in an increase in revenue. As a result, the toll road company will benefit from the increase in toll rates.

If Tolls on a Toll Road Can Be Raised Significantly