Pigovian taxes are not always effective because:
A)they do not directly compensate those who are affected by the externality.
B)it is difficult to identify whether the tax should be imposed on the consumer or the producer.
C)they are only used to benefit those who bear the externalities.
D)None of these are reasons why Pigovian taxes are not always effective.

Question

Quizplus · Accepted Answer

Pigovian taxes aim to correct externalities by imposing a tax equal to the external cost. However, they do not directly compensate those affected by the externality, which can limit their effectiveness in addressing the harm caused.

Pigovian Taxes Are Not Always Effective Because