Under what conditions is a congestion tax a good idea?

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In 2008, then-Mayor Michael Bloomberg proposed congestion pricing for New York City streets. Congestion pricing, in its simplest form, means that cars and trucks entering a specific highly congested area of Manhattan would have to pay an extra charge—perhaps as much as $8—during peak morning and evening rush hours. The proposal was approved by the New York City Council but turned down by the New York State Legislature. (LO6-4) a) Does this proposal rely on the idea of public goods, externalities, regulation, or redistribution? b) Show the effect of the congestion tax on a supply–demand diagram. c) Whom would it hurt, and whom would it help? d) Under what conditions is a congestion tax a good idea?

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