Which of the following statements is most correct?
A)Pigovian taxes are often preferred over direct regulation because they typically reduce externalities at a lower cost
B)Pigovian taxes are less preferred than direct regulation because they typically reduce externalities at a higher cost
C)Pigovian taxes are often preferred over direct regulation because they typically reduce externalities at a faster rate
D)Pigovian taxes are less preferred than direct regulation because they typically reduce externalities at a slower rate

Question

Quizplus · Accepted Answer

Pigovian taxes provide an economic incentive for people to reduce their negative externalities by making them pay for the cost. In contrast, direct regulation requires monitoring and enforcement, which can be expensive. Therefore, Pigovian taxes are often preferred over direct regulation because they typically reduce externalities at a lower cost.

Which of the Following Statements Is Most Correct