The Biggest Difference Between Using a Pigovian Tax or a Tradable

question 26

Multiple Choice

The biggest difference between using a Pigovian tax or a tradable allowance to correct for a negative externality is:

• A)the government collects revenues from a Pigovian tax, whereas a tradable allowance allows private parties to trade quota rights on their own.
• B)a Pigovian tax creates an efficient outcome, while a tradable allowance does not.
• C)a Pigovian tax maximizes total surplus, whereas a tradable allowance does not.
• D)All of these are differences between Pigovian taxes and tradeable allowances.

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