A Pigovian tax is: O unlikely to increase market efficiency. O equal to the size of the deadweight loss due to an externality. O a method of subsidizing the production of goods with social benefits. O intended to counterbalance a negative externality. Even with a Pigovian tax, a market with a negative externality may still be inefficient because: O the tax may be set too high or too low. O the government may not have the power to tax. O taxes create deadweight losses. O the distribution of surplus may not be fair.

A Pigovian tax is: O unlikely to increase market efficiency. O equal to the size of the deadweight loss due to an externality. O a method of subsidizing the production of goods with social benefits. O intended to counterbalance a negative externality. Even with a Pigovian tax, a market with a negative externality may still be inefficient because: O the tax may be set too high or too low. O the government may not have the power to tax. O taxes create deadweight losses. O the distribution of surplus may not be fair.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter10: Externalities

Section: Chapter Questions

Problem 3CQQ

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