One problem with the effectiveness of Pigovian taxes is:
A)the tax does not directly compensate those who are affected by the externality.
B)knowing whether to impose it on the consumer or producer.
C)identifying who is affected by the externality.
D)All of these are problems.

Question

Quizplus · Accepted Answer

Pigovian taxes are designed to correct the market outcome by imposing a tax equal to the external cost. However, they do not directly compensate those who suffer from the externality, which is a limitation of this approach.

One Problem with the Effectiveness of Pigovian Taxes Is