You need to check the folder permissions on your server and check that the account that you are using to run your application has access to that folder.
It is likely that you do not have the IUSR_computername permission on that folder. I've just had a quick scan and it looks like you will find the information you need here.
If that isn't the case, are you prompted for your username and password by the browser? If so it may be that IIS is configured to use Integrated authentication only, as described here.
Another simple fix I found was to delete the local IIS site (from within IIS Manager) and then re-create the virtual directory from the "Properties" of your web project in Visual Studio.
You do not have permision to view this directory or page using the credentials that you supplied.
This happened despite the fact the user is already authenticated via Active Directory.
There can be many causes to Access Denied error, but if you think you’ve already configured everything correctly from your web application, there might be a little detail that’s forgotten. Make sure you give the proper permission to Authenticated Users to access your web application directory.
Here are the steps I took to solve this issue.
Right-click on the directory where the web application is stored and select Properties and click on Security tab.
Click on Click on Edit…, then Add… button. Type in Authenticated Users in the Enter the object names to select., then Add button. Type in Authenticated Users in the Enter the object names to select.
Click OK and you should see Authenticated Users as one of the user names. Give proper permissions on the Permissions for Authenticated Users box on the lower end if they’re not checked already.
Click OK twice to close the dialog box. It should take effect immediately, but if you want to be sure, you can restart IIS for your web application.
Refresh your browser and it should display the web page now.
For me the Anonymous User access was fine at the server level, but varied at just one of my "virtual" folders.
Took me quite a bit of foundering about and then some help from a colleague to learn that IIS has "authentication" settings at the virtual folder level too - hopefully this helps someone else with my predicament.