In order to set a Pigouvian tax at the optimal level, the government must know the exact amount of the externality, which is

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Obtaining the exact amount of the externality can be difficult as it requires a comprehensive understanding of the behavior and interactions of individuals and firms in the market. Governments often rely on estimates and modeling techniques to determine the optimal level of Pigouvian tax.

In Order to Set a Pigouvian Tax at the Optimal