To ease road congestion caused by parked cars, a local government set up a tradable parking permits scheme. Each household was issued with a permit that allowed one car to be parked at the roadside. Households owning more than one car could purchase additional permits from households that had no cars. What is the most likely reason for this policy to fail?
- AFines for drivers parking in the area without a permit will internalise the externality.
- BThe local government has a monopoly over the issue of parking permits.
- CThose suffering from too many parked cars are compensated by the households owning extra cars.
- DToo many households own cars so the market in permits is very small.