ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -For example, when drivers are not liable for the health damage of car exhaust, drivers will equate only marginal private cost with marginal benefit. But if drivers are forced to pay for the health damage of car exhaust, their marginal cost will go up by the amount of the external cost.

Detailed explanation-2: -Light pollution is an example of an externality because the consumption of street lighting has an effect on bystanders that is not compensated for by the consumers of the lighting.

Detailed explanation-3: -External costs (also known as externalities) refer to the economic concept of uncompensated social or environmental effects. For example, when people buy fuel for a car, they pay for the production of that fuel (an internal cost), but not for the costs of burning that fuel, such as air pollution.

Detailed explanation-4: -Greater congestion and slower journey times for other drivers. Cause of death for pedestrians, cyclists and other road users. Pollution, health-related problems. Noise pollution.