Pigouvian taxes are designed to reduce:
A)the marginal cost of production.
B)the marginal benefit of consumption.
C)external costs.
D)external benefits.

Question

Quizplus · Accepted Answer

Pigouvian taxes are designed to reduce external costs, which are costs imposed on third parties who are not involved in the market transaction. By taxing these external costs, the government seeks to internalize them, so that the parties involved in the market transaction are forced to bear the true cost of their actions. This can lead to more socially efficient outcomes, as it reduces the amount of negative externalities in the market.

Pigouvian Taxes Are Designed to Reduce