If a Pigovian tax is too large,the resulting:
A) quantity will be too high.
B) outcome will not maximize surplus.
C) outcome will still be efficient.
D) All of these statements are true.

Question

Quizplus · Accepted Answer

If a Pigovian tax is too large, it can lead to excessive reduction in the quantity of the good or service being taxed, resulting in a suboptimal outcome that does not maximize surplus. Therefore, choice B is correct. Choices A and C are incorrect as they suggest that either the quantity will be too high or the outcome will still be efficient, which is not necessarily true with a large Pigovian tax. Choice D is incorrect as only choice B is correct.

If a Pigovian Tax Is Too Large,the Resulting