Many negative externalities exist in cities. For example, a high concentration of automobile traffic in cities generates pollution and causes congestion, and both pollution and congestion are negative externalities. When a particular person decides to drive a car in a city on a given day, he or she does not take into account the negative effects that driving his or her car has in terms of pollution and deterring other drivers from reaching their destinations (congestion).
Although negative externalities (including pollution and congestion) appear to abound in cities, people still prefer to live in cities (otherwise, they would not exist). In economic terms, discuss the forces that cause people to prefer life in the city. How do these forces relate to whether or not market outcomes are economically efficient?

  • CreatedDecember 05, 2014
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