Why are Pigovian taxes preferred to regulatory policies as methods to remedy negative externalities?
Pigovian taxes allow markets to coordinate optimal resource allocation. In order for regulations to be efficient, the government needs detailed information about specific industries, including information about the alternative technologies that those industries could adopt. Thus, taxes are likely to mitigate negative externalities at a lower cost to society.
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The classical economists attacked the mercantilist propositions that
a. state action was necessary to direct the capitalist system. b. money had no intrinsic value. c. output was completely supply-determined. d. the wealth of a nation was closely linked to the country's stock of precious metals. e. Both a and d
Suppose the government increases unemployment benefits, which are paid for with higher taxes on earnings. If the marginal propensity to consume is the same for both the beneficiaries of the unemployment benefits and the workers paying taxes, _____. a. GDP will first increase and then fall. b. There will be no change in real GDP. c. Real GDP will increase substantially. d. Real GDP will fall
substantially. e. GDP will first fall and then increase.
The budget line facing a household includes information on
a. prices of two goods and household income. b. household income and the price of money. c. the price of one good and household income. d. the price of two goods but no information on household income. e. preferences of goods at various prices.
The profit-maximizing level of employment for a price-taking firm occurs where marginal revenue product equals marginal resource cost. In contrast, the profit-maximizing level of employment for a price-setting firm occurs where marginal product equals marginal resource cost
Indicate whether the statement is true or false