The Operation of Large Trucks in Econoville Causes Damages to Public

Essay

The operation of large trucks in Econoville causes damages to public roads. The marginal external cost function of operating large trucks in Econoville is: MEC(m) = 0.05m, where m is the number of miles large trucks are driven in Econoville in thousands. The marginal benefit of large truck operation in Econoville is: MB(m) = 1,000 - 2m. How many miles do large trucks drive in Econoville if they are not forced to pay for damage to roads? If Econoville charges a fee for every thousand miles a large truck drives in Econoville, what is the optimal fee? If Econoville sets a standard for the quantity of miles large trucks drive in Econoville, what is the optimal standard? If the profitability of large truck operation in Econoville increases the marginal benefit function to: MB(m) = 1,500 - 2m and Econoville is using a standard, is it optimal for Econoville to increase the standard?