Graph 10-3

-Referring to Graph 10-3, which curve best represents a Pigovian tax?
A) A
B) B
C) C
D) D

Question

Graph 10-3
 
-Referring to Graph 10-3, which curve best represents a Pigovian tax?
A) A 
B) B 
C) C 
D) D

Quizplus · Accepted Answer

A Pigovian tax is a tax that is imposed on a negative externality to correct for the market failure that it creates. In Graph 10-3, curve A represents a tax that is imposed on the negative externality of pollution. This tax increases the cost of producing pollution, which leads to a decrease in the quantity of pollution produced.

Graph 10-3 -Referring to Graph 10-3, Which Curve Best Represents a Pigovian