Asked by Brittany Cates on May 28, 2024
Verified
Pigouvian taxes are designed to reduce:
A) the marginal cost of production.
B) the marginal benefit of consumption.
C) external costs.
D) external benefits.
Pigouvian Taxes
Taxes designed to reduce external costs.
External Costs
costs inflicted upon a third party when goods and services are produced and consumed.
- Compute the optimal per-unit levy for pollution under the Pigouvian system, taking into account the marginal social costs and benefits.
Verified Answer
SS
sasheka sewellMay 31, 2024
Final Answer :
C
Explanation :
Pigouvian taxes are designed to reduce external costs, which are costs imposed on third parties who are not involved in the market transaction. By taxing these external costs, the government seeks to internalize them, so that the parties involved in the market transaction are forced to bear the true cost of their actions. This can lead to more socially efficient outcomes, as it reduces the amount of negative externalities in the market.
Learning Objectives
- Compute the optimal per-unit levy for pollution under the Pigouvian system, taking into account the marginal social costs and benefits.
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