A Pigouvian Tax

Multiple Choice

A Pigouvian tax:

A) is levied on a good that creates a negative externality and should be set equal to the external cost to eliminate the deadweight loss.
B) subsidizes a good that creates a negative externality and should be set equal to the external cost to eliminate the deadweight loss.
C) is levied on a good that creates a positive externality and should be set equal to the external benefit to eliminate the deadweight loss.
D) is levied on a good that creates a positive externality and should be set equal to the social benefit to eliminate the deadweight loss.