Question

the government often intervenes when private markets fail to provide an optimal level of certain goods and services for example the government imposes an excise tax on gasoline to account for the negative externality that drivers impose on one another why might the private Market not reach the socially optimal level traffic without the help of government?

Answer 1

Answer:
the private Market not reach the socially optimal level traffic without the help of government because of below mentioned reasons:

• Private sector doesn't bear Social marginal cost which may sometime arises until government intervene.
• Some time due to international external factors which are not in the control of local private market may comes in situation where it needs government interventions.
• If some unforeseen circumstances' comes, like current situation of COVID-19, corporations are not prepared for that and hence needs government intervention.
• A presence of negative externality will drive a wedge between private marginal cost and social minimal cost, by expanding the private minimal cost by sum of the cost of negative externality:
  
• A negative externality cost isn't borne by private industries unless the government induces measures to either drag down the cost, or by forcing punishment for making negative externality, which rectifies the market inefficiency.

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