Question

Consider two ways of commuting in a crowded city: taking public transportation, such as subway and buses, or driving your own car.A person who chooses to take public transportation in a crowded city imposes a NEGATIVE OR POSITIVE externality on drivers. A policy implication of this result is a SUBSIDY FOR OR TAX ON those who take public transportation.Persons who choose to drive their own cars to get around in a crowded city impose a NEGATIVE OR POSITIVE externality on other drivers. A policy implication of this result is a TAX ON OR SUBSIDY FOR those who drive their own cars.

Answer 1

Answer and Explanation:

An individual who decides to take public transportation in a crowded city puts drivers on a POSITIVE externality. A policy implication of that outcome is a SUBSIDY for those taking public transport.

Many drivers are enforcing a NEGATIVE externality on people who want to drive their own cars to get around in a crowded city. A policy implication of that outcome is a TAX on those driving their own cars.