How do Pigouvian taxes help in reducing pollution? What will ...

[Alainaaa8]

How do Pigouvian taxes help in reducing pollution?
 
  What will be an ideal response?

Question 2

Refer to Table 10-1. Using the table above, what is the approximate growth rate of real GDP from 2015 to 2016?
 
  A) 1 B) 2 C) 3 D) 4

[Mollythedog]

Answer to Question 1

Pollution is an example of a negative externality in that it imposes costs on people otherthan those causing the pollution. In such a case, the social marginal cost of producingthe good that causes pollution exceeds its private marginal cost by the amount of thenegative externality, causing the good to be overproduced. A Pigouvian tax on the good canbe used to reduce the amount of pollution by forcing firms to internalize the cost to societyfrom their pollution. The tax is the difference between marginal social cost and marginalprivate cost; such a tax would reduce the quantity of the good produced to the sociallyoptimal level.
A-head: ECONOMICS OF THE ENVIRONMENT
Concept:Pigouvian taxes

Answer to Question 2

C

[Alainaaa8]

Excellent

[matt95]

Gracias!