A Pigovian Tax Internalizes an External Cost Because

question 30

Multiple Choice

A Pigovian tax internalizes an external cost because

• A) the cost then enters the decision-making process of the producer.
• B) it would be collected by the Internal Revenue Service.
• C) the revenue is used to compensate injured parties.
• D) no transactions costs are created.

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Definitions:

Compensatory Damages

financial awards given to a plaintiff to reimburse actual losses, expenses, or suffering due to the defendant's wrongful act.

Performance Value

Refers to the actual utility or effectiveness of a service, product, or asset in achieving its intended purpose or results.

Substantial Performance

A legal principle indicating that a contract has been nearly completed, enabling the performing party to receive payment, minus damages for any minor unfinished work.

Workmanlike Manner

The quality of performance in a job or task that meets acceptable industry standards and practices.