Partial equilibrium effects of congestion taxes
Answer the following concerning the partial equilibrium effects of congestion taxes on urban land use.
a) Assuming the revenue from a congestion tax is not redistributed to city residents, what effect would a congestion tax have on the residential bid rent curve?
b) If the government reduced other taxes after instituting a congestion tax, how would the resulting bid rent function compare to the bid rent function in (a)? Explain.
c) How does the residential bid rent curve in (b) compare to the residential bid rent function with no congestion taxes? Explain.
d) Explain how population density of the city is affected by congestion taxes.
