Question 1:(10 marks)In your own words, summarize the article, “Road Congestion in Australia” bytheAustralianAutomobile Association, October 2018, available at this link:https://www.aaa.asn.au/wp-content/uploads/2018/10/AAA-Congestion-Report-2018-FINAL.pdf.In particular, what are the main messages of the article? [Hint: Please link your summary withrelevant economic theories wherever you can]Question 2:(10 marks)Suppose there is a competitive market for road space. The demand for road space falls as the pricerises(due totheincome and substitution effects). The supply for road space is fixed, which meansthat the supply curve is vertical. Use appropriate diagramsto answerthe following questions:(a) What is the market price of road space in a competitive equilibrium?(b) Suppose that road space is a public good, which is freely available to individuals. How much is theexcess demand for road space?(c) Suppose wemeasure congestion by the amount of excess demand for road space. Can a rise infuel taxes and car taxes reduce congestion?(d) Can building more roads reduce congestion? Would your conclusions change if, with more roads,individuals were encouraged to drive more?Question 3:(10 marks)Do you think a road-pricing system by charging the use of road space is a good policy to reduce trafficcongestion in Australia? Why or why not?Use appropriate diagrams tosupport youranswer. [Hint:Please do literaturereview to find out the pros and cons of the road-pricing system in terms ofeconomic efficiency and social equity, etc.]Question 4:(10 marks)Findtwoother cities that are among the most congested cities in the world. Give a brief descriptionabout thecongestion-easing policies in these cities. [Hint: If possible present concrete facts andfigures]. Provide your views or suggestions on the best measure/policy to reduce road congestion inAustralia.Studentsmustcorrectly use theHarvard style of referencing
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