If a Pigovian tax is too large, what result can be expected?
A)The equilibrium quantity will be too high.
B)The outcome will not maximize surplus.
C)The outcome will still be efficient.
D)All of these are true.

Question

Quizplus · Accepted Answer

A Pigovian tax that is too large will result in an outcome that does not maximize surplus because it will distort the market beyond the correction of the externality it was designed to address, leading to inefficiencies.

If a Pigovian Tax Is Too Large, What Result Can