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.

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.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter30: Market Failure: Externalities, Public Goods, And Asymmetric Information

Section: Chapter Questions

Problem 10QP

See similar textbooks

Similar questions

Suppose the government imposes a tax of $20 million per month on cable producers. If Comcast wants to maximize its profit, what price per subscription should it charge per month?
During the COVID-19 pandemic, alcohol consumption increased dramatically. In response, the government is considering increasing the tax rate on alcohol. It's known that the demand for alcohol is inelastic, and the supply of alcohol is perfectly elastic. Which of the following statements are true? (Select all that apply.) Question 5Answer a. A tax on alcohol is one way to make consumer internalize the cost of the externalities associated with drinking, such as long-term health implications. b. Regardless of how the tax is implemented, consumers will pay the full amount of the tax. c. It doesn't matter how the tax is implemented. d. Consumers and suppliers will split the burden of the tax. e. The government will collect more revenue if the tax is on the suppliers. f. Alcohol consumption will decrease more in the short-run than in the long-run. g. Alcohol consumption will decrease more in the long-run than in the short-run. h. There are positive…
Which of these is a negative production externality? An airline manufacturer must hold up production of a plane at great cost due to delays in its global supply chain. A cereal manufacturer suffers losses due to a drought and unexpected increases in market prices of grains that it uses in its cereals. O Consumers complain to the wrong regulators about price gouging in gasoline markets. A producer of lead for batteries that are used nationwide emits noxious gases in its factory town and local people are getting sick. Thch Save
Consider Good A. There are NO externalities associated with Good A. a.) Draw a ( general- you don’t need any specific numbers) graph that shows the deadweight loss that would result if a tax is placed on Good A. b.) Suppose that, after the tax is placed on Good A, the quantity consumed ( by all customers) is equal to 90,000 units of Good A. Is the efficient level of output in the market for Good A greater than 90,000 , less than 90,000 , or equal to 90,000 ( just circle your answer ; you don’t have to explain)? (7) The efficient level is greater than 90,000 The efficient level is less than 90,000 The efficient level is equal to 90,000
Suppose government impose a tax of 1 dollar per bottle on sellers of industrial detergent. Explain 3 dimensions in which you can explain the effect of this tax.
Please answer correctly and only typed answer
Compared to a good with no externalities, a good with a negative externality at each corresponding price. will appear to have experienced a Olncrease in Supply ODecrease in Supply Olncrease in Demand ODecrease in Demand
"A Pigouvian tax will be more effective in remedying a negative externality, the more elastic the demand for the good in question." True or false? Justify your answer briefly.
I need answer typing clear urjent no chatgpt
Please think of one example of a product that you use on a regular basis for which some of the cost of production or consumption are externalized. Please explain. What will be the long-term cost for or impact on society of this externalization? How much more would you be willing to pay for that product in order to have all costs factored into the price?
Does an externality cause total surplus to increase or decrease?
Based on market research, a film production company in Ectenia obtains the following information about the demand and production costs of its new DVD:1 Demand: P = 1,000 – 10Q Marginal Revenue: MR = 1,000 – 20Q Marginal Cost: MC = 100 + 10Q a. Find the price and quantity that maximize the company’s profit. b. Find the price and quantity that would maximize social welfare. c. Use a graph to illustrate the DWL and calculate the dollar value of the DWL.