If producers are forced to pay a Pigovian tax when negative externalities exist in a market, then: those who interact in the market will lose surplus. producers will gain surplus. society will gain surplus.
A)I only
B)II and III only
C)I and III only
D)I, II, and III

Question

Quizplus · Accepted Answer

A Pigovian tax is designed to correct market inefficiencies by taxing the producer for the negative externalities they create, leading to a more socially optimal level of production. This means that while those who interact in the market (both producers and consumers) may lose surplus due to the tax, society as a whole gains surplus because the tax helps to mitigate the negative externalities. Producers do not gain surplus from the tax; instead, they are incentivized to reduce the negative externalities.

If Producers Are Forced to Pay a Pigovian Tax When