Question

A government decides to subsidise rail travel. What will be an external benefit of this move? *
a.A rise in government expenditure
b.Increased crowding on trains
c.Lower fares for train passengers
d.Reduced congestion on roads

Answer 1

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Answer 2

The answer in this case would be option d. or Reduced congestion on roads.

Explanation:

• External benefit is alternately referred to as positive externality which implies an indirect or external benefit of any action or conduct to the society as a whole which is not a directly intended objective or goal of such action or conduct.
• In this context,the government policy of subsidy enforcement for railway travel can directly lead to an increase in government expenditure,higher number of passenger travelling by train and lower fares for railway passengers.
• However,reduced congestion on normal roads and highways due to higher travel rates in trains can be considered as a indirect positive consequence or external benefit of rail travel subsidy implemented by the government.Therefore,in this case,it is an extra or indirect positive impact of government action or policy.