________ tax is imposed on transactions that have a negative externality; for example,
pollution.
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Pigovian.
- Pigou, is a tax on a market transaction that creates a negative externality, or an additional cost, borne by individuals not directly involved in the transaction.
- Examples include tobacco taxes, sugar taxes, and carbon taxes.
- A Pigovian tax is intended to tax the producer of goods or services that create adverse side effects for society.