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:

Package Sizes

The dimensions or volume of the container or packaging material used to encase products for distribution, sale, or storage.

Positive Outcomes

Favorable results or benefits achieved from particular actions or activities, especially in the context of decisions or policies.

Anchoring

A cognitive bias that describes the human tendency to rely too heavily on the first piece of information offered when making decisions.

Overconfidence Effect

A psychological tendency where a person's personal assurance in their decisions exceeds the actual correctness of those decisions.