In a small town, the local government has noticed that more residents are using bicycles for transportation, leading to reduced traffic congestion and improved air quality. However, the market for bicycles has not adjusted to this positive externality. If the government wants to encourage more bicycle usage, which of the following interventions would best help achieve market equilibrium that reflects the social benefits of cycling?

To encourage more bicycle usage and reflect its social benefits, the government could implement subsidies for bicycle purchases. This means they would provide financial assistance to residents when they buy bikes, making it more affordable and attractive to choose cycling over driving. For example, if the government gives a $100 subsidy, more people might decide to buy bicycles, leading to increased usage and further reducing traffic and pollution. By making bicycles cheaper, the government helps align the market with the positive effects cycling has on the community, ultimately leading to a healthier environment and less congestion. This way, the market can reach a better equilibrium that considers both individual choices and social benefits.