solution

Because the federal government covered the lion’s share of the costs, Los Angeles built the 17.4-mile-long Red Line subway system in the 1990s, at a cost of $4.7 billion ($270 million per mile). The fully allocated costs are estimated to be $1.15 per passenger mile, whereas the initial fare was $0.07 per mile for the journey. Using a graph, explain why output efficiency was or was not served by the subway’s construction. (Note: To cover the city’s portion of the construction costs, local bus fares were raised, and daily bus ridership declined by more in the wake of the fare increase than the number of residents taking the Red Line on an average day.)