In the late 1970's, the U.S. mandated a maximum highway speed of 55 miles per hour to economize on fuel. Evidence showed that the lower 55-miles-per hour speed limit also significantly reduced traffic fatalities. Nevertheless, when the gas shortage eased, we have returned to the higher speed limits. Provide an economic rationale for not permanently lowering the speed limit to 55 miles per hour when we know that it will save lives.

Question

Quizplus · Accepted Answer

The Answer is Although experience proves that lower speed limits would almost certainly save lives, the opportunity costs of such a policy are considered to be excessive by most policy makers (and voters). If speed limits were set at 55 miles per hour, much more valuable time would be required for everything from commuting, to shipping goods, to leisure travel. Since people's time is scarce, it has a high opportunity cost. We are willing to trade off the costs of higher speed limits-a greater risk of fatalities-in order to avoid the even greater cost of increased time spent traveling from place to place.

In the Late 1970's, the U