When a Pigouvian tax corrects for a negative externality, some damages will remain, as well as...
When a Pigouvian tax corrects for a negative externality, some damages will remain, as well as some deadweight loss. True of False and why .
Homework Answers
Answer - False
The given statement is incorrect. Pigouvian Tax is imposed on the externalities and to bring the production back to socially efficient level which before the tax was operating above the socially efficient level. This is done by imposing the tax , reducing the supply and internalising the costs.
Through this machanism the deadweight loss is removed and the damages do not remain. The production returns to the socially efficient level and the price rise because of the decreased supply.
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what
is the deadweight loss after the tax? I know 24 is the optimal
tax.
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TRUE/FALSE QUESTIONS
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what
is the deadweight loss after the tax? I know 24 is the optimal
tax.
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