If a Pigovian Tax Is Too Large, What Result Can

question 24

Multiple Choice

If a Pigovian tax is too large, what result can be expected?

• A)The equilibrium quantity will be too high.
• B)The outcome will not maximize surplus.
• C)The outcome will still be efficient.
• D)All of these are true.

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Definitions:

Income

The money received by a person or entity for labor, services rendered, investment returns, or other sources during a specific period.

Exports

Goods or services produced in one country and sold to buyers in another, contributing to a country's economy by bringing in revenue.

Demand for Currency

The desire or need for a particular currency, which can be influenced by interest rates, economic stability, and the overall economic strength of the country issuing the currency.

Flexible Exchange Rates

A currency system where the value of a country's currency is allowed to fluctuate according to the foreign exchange market's demand and supply forces.