Pigovian taxes are not always effective because it is difficult to identify:
A)whether the tax should be imposed on the consumer or the producer.
B)what the amount of the tax should be.
C)who is being affected by the externality.
D)None of these are reasons why Pigovian taxes are not always effective.

Question

Quizplus · Accepted Answer

Pigovian taxes aim to correct market inefficiencies by taxing activities that generate negative externalities. However, accurately determining the optimal tax level to counterbalance the social cost of the externality is challenging, making the effectiveness of Pigovian taxes variable.

Pigovian Taxes Are Not Always Effective Because It Is Difficult