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This week we are going to examine substitute goods, highways and a bit about how we pay for highways.
https://youtu.be/c5DCmDXJun4 Video Private roads
Highway construction and maintenance are funded mainly by motor fuel taxes (the gasoline tax). There is a federal gasoline tax (an excise tax) which is 18.4 cents per gallon for gasoline and 24.4 cents per gallon for diesel fuel. Then there are state taxes per gallon and, in some states, a sales tax as well as a gallonage tax. For an overview of state motor fuel taxes go to the American Petroleum Institute’s Motor Fuel Taxes page. Since only those who have vehicles pay the motor fuel tax, it is also called a User Fee.
The federal motor fuels tax goes into the Federal Highway Trust Fund (it also funds public transit) which is a major source of highway funding nationally. However, as vehicles use less fuel because of higher mileage, the Trust Fund balance becomes insufficient to meet the infrastructure needs. The state highway trust funds are experiencing the same problems. Thus, states are looking for other ways to fund new highways.
Which brings us to this week’s discussion topic: Toll Roads.
https://youtu.be/FgttpKZZz7o accounting cost/economic costs
https://youtu.be/nQ5APwtB-ig Fixed and variable costs
https://youtu.be/UI-LL8-dVAs Cost curves
https://youtu.be/Jax-ZyL7DkI How markets fail
https://youtu.be/7jdvnSm48nY Negative externalities
https://youtu.be/R6ojYtKazgQ Price gouging