|Question||Tolls on approximately one-third of the 5,000 miles of highway, bridges, and tunnels in the United States increased in 2005.68 Tolls went from $2.00 to $3.00 on seven bridges in the San Francisco Bay Area. The Pennsylvania Turnpike increased the average fare by 43 percent, while the New York State Thruway increased its tolls by 25 percent for cars and 35 percent for trucks. Tolls on the Thruway were supposed to be removed a decade
ago when the bonds that financed the construction of the highway were paid off. However, these plans were changed when state officials decided they wanted the Thruway to finance another highway that is toll-free. For people who want to avoid toll roads, the costs are not insignificant. Alternatives may be less-direct routes that go through densely packed downtowns or sprawling suburbs. The number of cars using the Pennsylvania Turnpike decreased by less than 1 percent after the toll increase. Road officials need to use toll revenue for repairs and maintenance. They are trying to soften the impact of higher tolls with smaller increases for drivers that pay electronically using a transponder mounted on the car windshield that deducts tolls from a customer’s prepaid account.
a. Why are tolls a popular source of revenue from the viewpoint of road officials?
b. What is the impact of maintaining tolls on the New York State Thruway?
c. What is the price elasticity of demand for use of the Pennsylvania Turnpike?