When people “consume” their cars, the social benefit would be less than the private benefit due to the negative externality of fumes from cars. Society however benefits because there is also positive externality from the consumption of cars. The purchase and use of cars would make public transport less crowded and more comfortable. Also government can benefit from the usage of the funds derived from the taxes imposed on the production of cars. Taxing the production of cars helps to solve the market failure its production creates. It might allow the production firms to finally achieve allocative
When people “consume” their cars, the social benefit would be less than the private benefit due to the negative externality of fumes from cars. Society however benefits because there is also positive externality from the consumption of cars. The purchase and use of cars would make public transport less crowded and more comfortable. Also government can benefit from the usage of the funds derived from the taxes imposed on the production of cars. Taxing the production of cars helps to solve the market failure its production creates. It might allow the production firms to finally achieve allocative