CA Foundation P4 · Chapter 7 · Question 5 of 15
A tax imposed on a polluting firm equal to the marginal external cost of its activity is known as a:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Pigouvian tax
Explanation
A Pigouvian tax, named after A. C. Pigou, internalises the externality by raising the producer's private cost to equal social cost, reducing output to the socially optimal level.
More Public Finance MCQs
- Q7After buying comprehensive vehicle insurance, a driver becomes careless about locking his car. This is an example of:
- Q8Market demand is Qd = 500 - 10P and supply is Qs = 100 + 10P. If the government imposes a price ceiling of Rs. 15, the market will…
- Q9When the government fixes a minimum support price above the market equilibrium price for a crop, the likely result is:
- Q10Fiscal deficit is defined as:
- Q11A government's budget shows (Rs. crore): revenue receipts 900; non-debt capital receipts 50; total expenditure 1,400, of which interest…