Check out the classroom application of the WSJ article (courtesy of James Dearden and the WSJ's Micro Weekly Review):
Funds for Highways Plummet As Drivers Cut Gasoline Use
by Christopher Conkey
Jul 28, 2008
Page: A1
TOPICS: Public Economics
SUMMARY: An unprecedented cutback in driving is slashing the funds available to rebuild the aging highway system and expand mass-transit options, underscoring the economic impact of high gasoline prices. The resulting strain is touching off a political battle over government priorities in a new era of expensive oil.
CLASSROOM APPLICATION: The decline in the physical state of the nation's aging highway system combined with a reduction in gasoline tax revenues, which fund repairs of the highway system, raises two interesting policy issues. First, if highway repair continues to be funded by gasoline tax revenues, the issue is whether federal and state governments should raise gasoline taxes. Second, if states move further in the direction of instituting toll roads, the issue of pricing becomes more important.
QUESTIONS:
1. (Introductory) What is the effect of an increase in gasoline prices on gasoline tax revenues? What is the effect of a change in gasoline tax revenues on the state of the U.S. highway system?2. (Advanced) Should state and federal governments raise gasoline taxes? What is the effect of the tax increases on the amount of highway driving? Would an increase lead to less highway wear and tear, and thus lower maintenance costs?
3. (Advanced) Should state and federal governments switch more roads to toll roads? Discuss the economic efficiency and fairness of toll roads.
