Economics · Externalities and Taxation
A Pigouvian tax is a tax levied on an activity that generates negative externalities, and its optimal rate is:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1equal to the total external cost.
- 2equal to the average external cost.
- 3greater than the marginal external cost.
- 4exactly equal to the marginal external cost at the efficient level of output.✓
Correct answer
exactly equal to the marginal external cost at the efficient level of output.
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