A Pigovian Tax Is a Tax

question 46

Multiple Choice

A Pigovian tax is a tax:

• A) meant to counter the effect of a negative externality.
• B) that increases efficiency in a market.
• C) that increases total surplus in a market.
• D) All of these statements are true.

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Definitions:

Natural Monopolies

Industries in which high infrastructure costs and other barriers make it efficient for a single company to supply all of the market's needs.

Output

The total quantity of goods or services produced by an individual, firm, or country over a specified period.

Government Deregulation

The process of reducing or eliminating government rules controlling how businesses can operate, often to encourage more competition and innovation.

Economies of Scale

Enterprises gain cost benefits from their scale of operation, which typically results in the cost per unit of output decreasing as the scale increases.