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Please explain carefully0. Certain type of production causes a negative extenality. Which of the following will N lead to a socially optimal output level? (PT stands for the Pigouvian Tax rate a) collecting PT for each unit of output starting from the socially optimal level b) collecting a tax equal to the marginal extemal effect for a given output level, for each unit of output c) collecting PT for each unit of output collecting PT for each unit of output up to (and including) the socially optimal level None of the remaining answers is correct. e)

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Answer #1

Answer is Option B)

Pigouvian tax is defined as the difference between the SMC & PMC at the socially efficient output level, which equals the marginal external damage at the optimum level.

Hence in option b , no pigouvian tax is applied

So it won't lead to social optimal level.

Thus pigouvian tax is uniformly applied to all units of output

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