Using a toll to reduce traffic when congestion is greatest is a:
A) regulation solution
B) command-and-control policy
C) Pigovian tax
D) Coase theorem solution

Question

Quizplus · Accepted Answer

Implementing a toll during peak traffic hours is an example of a Pigovian tax. This tax works by increasing the economic cost of driving during congested periods, which encourages drivers to adjust their behavior (such as taking public transportation or driving during off-peak hours) to reduce traffic congestion. This approach can be more economically efficient than regulation or command-and-control policies because it provides a direct financial incentive for individuals to reduce their demand for driving during peak hours. The Coase Theorem solution also relies on direct negotiation and bargaining among affected parties, which may not be practical or feasible in this situation.

Using a Toll to Reduce Traffic When Congestion Is Greatest