If a Pigovian tax is not large enough, the resulting market quantity will be _______ the efficient quantity.
A)equal to
B)more than
C)less than
D)set where social marginal cost equals

Question

Quizplus · Accepted Answer

If a Pigovian tax is not large enough, the resulting market quantity will be less than the efficient quantity. This is because the tax will not fully internalize the negative externality, and so the market will produce too little of the good.

If a Pigovian Tax Is Not Large Enough, the Resulting