Question

The Economy Tomorrow The following Economy Tomorrow section provides estimates of time spent in traffic delays.

Rebuilding America

The output of the U.S. economy depends not only on private investment but on public investment as well. The infrastructure of transportation, communications, and environmental systems affects the nation's production possibilities. As we look to the future, we have to wonder whether that infrastructure will satisfy the needs of the economy tomorrow. If it doesn't, it will become increasingly difficult and costly to increase output. Inadequate infrastructure would not only worsen short-term macro outcomes but also impair our ability to compete in world markets.

The Cost of Delay

The failure to expand the infrastructure could prove costly. The U.S. Department of Transportation estimates that people now spend approximately 3.5 billion hours a year in traffic delays. If the nation's highways don't improve, those delays will skyrocket to more than 4 billion hours a year a decade from now. That's a lot of labor resources to leave idle. Moreover, cars stuck on congested highways waste a lot of gasoline-nearly 4 billion gallons a year-and spew enormous amounts of carbon dioxide into our atmosphere.

If the average worker produces $110 of output per hour, what is the opportunity cost of

 

Instructions: Round your responses to the nearest whole number.

 

a. Current traffic delays?

 

     $  billion

 

b. Estimated delays in 10 years (assuming no change in worker productivity)?

 

     $  billion

Answer 1

A.

 Average workers produce = $110

Hours lost due to traffic delays = 3.5 billion hours

Opportunity cost = Value of output per hour * Hours lost in traffic delays

                         = $110 * 3.5 billion

                         = $385 billion

B.

Average workers produce = $110

Hours estimated to be lost due to traffic delays in 10 years = 4 billion hours

Opportunity cost = Value of output per hour * Hours lost in traffic delays

                         = $110 * 4 billion

                         = $440 billion