When a Pigouvian tax is imposed,________.
A) the marginal private cost curve shifts upward
B) the demand curve shifts rightward
C) the marginal social cost curve shifts downward
D) the marginal social benefit curve shifts downward

Question

Quizplus · Accepted Answer

A Pigouvian tax is designed to correct for externalities in the market. When imposed, it increases the cost of production for the producer, effectively shifting the marginal private cost curve upward to account for the external costs not previously considered.

When a Pigouvian Tax Is Imposed,________