Which of the following may be classified as a 'Pigouvian tax'?
Show answer & explanation
Correct answer: C
Explanation
The correct answer is option 3 i.e. Carbon tax.
| Pigouvian Tax |
A Pigouvian tax is placed on any activity that creates socially harmful externalities. |
| Pigouvian taxes shift the costs from society to the producers of these externalities. | |
| Gas, carbon, and noise taxes are examples of Pigouvian taxes. | |
| Pigouvian taxes can increase the burden on low-income earners. |