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

Question

Quizplus · Accepted Answer

A Pigovian tax is a tax imposed on a negative externality to correct the market failure. If the tax is not large enough, the resulting market quantity will be less than the efficient quantity.

If a Pigovian Tax Is Not Large Enough,the Resulting Market