Assume that the government introduces a new road pricing system for transport trucks that represents the costs of the negative externalities they create. Amongst other things, these higher road charges for trucks have an impact on intermodal competition, in particular rail and air modes.

(a) Draw and explain an appropriate model(s) that illustrates the economic rationale for assessing trucks with charges for their negative externalities.

(b) Use and appropriate economic model to explain how changing the cost of trucking is likely to impact the other competing modes of transport, like rail.