The textbook theory of Pigou tax is somewhat misleading because it tells us that the tax on goods with negative externality always leads to higher prices and lower economic outputs. However, it is theoretically possible that the tax may result in lower prices and higher economic outputs in the long run. Is this true or false? Give your reasoning. No answer from Chat GPT will dislike.

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter10: Externalities
Section10.1: Externalities And Market Inefficiency
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The textbook theory of Pigou tax is somewhat misleading because it tells us that the tax on goods with negative externality always leads to higher prices and lower economic outputs. However, it is theoretically possible that the tax may result in lower prices and higher economic outputs in the long run. Is this true or false? Give your reasoning. No answer from Chat GPT will dislike.
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