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 of traffic without the help of government?

Answer 1

So, when government intervene into the private market they would put heavy taxes on purchase of new cars or putting more tariff on gasoline, to demotivate purchase of car and use of private cars and cabs

Socially optimal achieved when government impose enough tarrif and taxes on consumer so the externalities get paid off.

Government intervene with tariff and taxes to take care of externalities like pollution.

If the government don't intervene in the market. say, there is no tax on car purchase and no tariff on gasoline. People will be motivated or not discouraged to purchase new car and ride cars and taxis, as it will be cheaper for them to go from their own vehicle or cab than going from public transport. Basically public transport is kind of inferior good in consumer choice and when purchasing power increases, inferior good demand decreases. So when there is too many vehicles on the road without government intervention traffic will be above socially optimal level

When government intervene traffic reduces and with the tariff and taxes they can payoff the others who get affected by the externalities