When set correctly, a Pigouvian tax is efficient because it is equivalent to a lump sum tax.
Answer the following statement true (T) or false (F)
False
Rationale: A lump sum tax does not change relative prices. A Pigouvian tax does change relative prices -- to bring the externality-distorted market price in line with what the price would be if the supply curve arose from the social rather than the private marginal cost curve.
You might also like to view...
A method of valuing a life that estimates how much money it takes to get the typical person to bear an additional risk of death is called the
A) lost-income approach. B) compensating differential approach. C) daredevil approach. D) price-is-right approach.
If an employee receives health insurance through his or her employer, the employer
A) still withholds contributions for Medicare and Medicaid from the employee's paycheck. B) still withholds contributions for Medicaid, but not Medicare, from the employee's paycheck. C) still withholds contributions for Medicare, but not Medicaid, from the employee's paycheck. D) is no longer required to withhold contributions for Medicare or Medicaid from the employee's paycheck.
How can specializing in lending help to reduce the adverse selection problem in lending?
What will be an ideal response?
When people anticipate a company’s earnings will rise, prospective stockholders are willing to pay ______ for its stock, and current stockholders ______ to sell.
a. less; are eager b. more; are eager c. less; are reluctant d. more; are reluctant