One Problem with the Effectiveness of Pigovian Taxes Is

question 5

Multiple Choice

One problem with the effectiveness of Pigovian taxes is:

• A)knowing what the value of the tax should be.
• B)knowing whether to impose it on the consumer or producer.
• C)identifying those who are affected by the externality.
• D)All of these are problems.

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Definitions:

Unit Elastic

Describes a situation where a percentage change in price leads to an equal percentage change in quantity demanded or supplied.

Quantity Demanded

The aggregate quantity of a product or service that buyers are ready and capable of buying at a specified price point over a certain timeframe.

Price

The amount of money or the value that is considered to be the equivalent of a good or service.

Elasticity of Demand

A measure of how sensitive the quantity demanded of a good is to a change in its price, indicating how consumers' purchasing decisions are affected by price changes.