Which of the following statements about a Pigovian tax is true? If the amount of the tax is equal to the external cost, deadweight loss will be zero. The tax must be placed on producers. The tax moves the market quantity closer to the efficient quantity.
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 for externalities by aligning private costs with social costs, thereby reducing deadweight loss when set equal to the external cost (I). It does not have to be placed exclusively on producers; it can be levied on consumers as well (II is incorrect). The tax indeed moves the market quantity closer to the efficient quantity by internalizing external costs (III).

Which of the Following Statements About a Pigovian Tax Is