Pigovian taxes are used to counterbalance:
A) negative externalities.
B) positive externalities.
C) network externalities.
D) They could be used to counteract any of these.

Question

Quizplus · Accepted Answer

Pigovian taxes are used to counterbalance negative externalities, which are costs imposed on society that are not reflected in the market price of the good or service being produced or consumed. By levying a tax on the activity that is causing the negative externality, the price of the good or service rises, reducing the quantity demanded and providing an incentive to producers to reduce the negative externality. Pigovian taxes are not typically used to address positive or network externalities.

Pigovian Taxes Are Used to Counterbalance