Economics (AS & A Level) · May / June 2022 · Paper 32 · Question 13

To reduce road congestion caused by parked cars, a local government introduced a system of tradable parking permits. Households were given a permit allowing them to park one car at the roadside. Households with more than one car could buy extra permits from households with no cars. What is the most likely reason for this policy to fail?

1. AFines for drivers parking in the area without a permit will internalise the externality.
2. BThe local government has a monopoly over the issue of parking permits.
3. CThose suffering from too many parked cars are compensated by the households owning extra cars.
4. DToo many households own cars so the market in permits is very small.

As printed in the paper