A Pigouvian Tax Can Lead to the Efficient Level of Production

question 49

Multiple Choice

A Pigouvian tax can lead to the efficient level of production and consumption of:

• A)a public good.
• B)a common resource.
• C)an artificially scarce good.
• D)no goods since all taxes cause inefficiency.

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Definitions:

Sharpe Ratio

Reward-to-volatility ratio; ratio of excess return to portfolio standard deviation.

Standard Deviation

Standard Deviation is a measure of the dispersion or variability of a set of data points or investment returns around the mean.

Returns

The profit or loss derived from an investment over a particular period, usually expressed as a percentage.

Sharpe Ratio

A measure used to evaluate the risk-adjusted return of an investment by dividing the difference between the investment's return and the risk-free rate by the standard deviation of the investment's returns.