Traffic congestion on the roads is costly for society. Private motorists and commercial firms bear additional costs in time and high fuel consumption, and there are environmental implications arising from congestion. The question I am considering in this issue of ECONOMIC REVIEW explores the ways in which traffic congestion can be viewed as a form of market failure, and evaluates one possible solution to the problem.
(a) Analyse the reasons why traffic congestion is an example of market failure. (15 marks)
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