Answer to Question #140076 in Microeconomics for shahmeer

Question

4. You are an intern to the editor of a small-town newspaper in Mallsburg, Pennsylvania. Your boss, the editor, asks you to write the first draft of an editorial for this week’s paper. Your assignment is to describe the costs and the benefits of building a new bridge across the railroad tracks in the center of town. Currently, most people who live in this town must drive 2 miles through thickly congested traffic to the existing bridge to get to the main shopping and employment center. The bridge will cost the citizens of Mallsburg $25 million, which will be paid for with a tax on their incomes over the next 20 years.What are the opportunity costs of building this bridge? What are the benefits that citizens will likely receive if the bridge is built? What other factors might you consider in writing this editorial?

Answer 1

$\bold {Opportunity \space Cost}$

Opportunity cost is the value of the next best alternative forgone. Construction of the new bridge will bring the following opportunity costs:

• Disruption of business and revenue loses by businesses who were operating near old bridge, who shall be dislocated and relocated.

• the value of investments and projects that the government could have pursued had it not constructed the bridge.

• Value of goods and services the government could have enjoyed or produced with the revenue had it not build the bridge.

• A temporal loss of calmness, tranquility, and low pollution due to increased land, noise, and air pollution associated with the bridge construction.

• markets distortions and loss of economic efficiency in markets as a result of increased income tax expense.

• The forgone economic welfare, consumer surplus and producer surplus, eroded by price adjustments due to new tax income.

• A decrease in living standards and forgone demand driven business investments and production due to a fall in disposable income and living standards as a result of new income tax.

$\bold {Likely \space benefits \space of \space new \space bridge}$

The new bridge will bring benefits to both shoppers, businesses, workers, and commuters in general. The following are some of the benefits.

• A reduction in congestion in the city

• A reduction in travel time to and from the city center for both workers, shoppers, and other commuters

• A reduction in noise and air pollution in the city due reduced congestion.

• improvement in business efficiency to business people as orders purchase and delivery speed increase due to reduced congestion.

• Increased orderliness in the city as vehicles quickly clear.

• Shopping experience by customers increase as they can quickly travel.

• Shop owners revenues boost as sales increase due to increase in customers who had been shopping in other areas before, avoiding delays due to congestion.

$\bold {Other \space factors \space to \space consider }$

Government must also consider,

• The availability of space for the construction of the new bridge. Consider how much businesses and infrastructure shall be destroyed in the process.

• Must consider the availability of alternative exit points for vehicles during the construction process.

• must consider the amount of time required to complete the bridge and the available alternatives for the nearby businesses affected during the process.