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Question : Which of the following may be classified as a 'Pigouvian tax'?

Option 1: Income tax

Option 2: Carbon tax

Option 3: Corporate tax

Option 4: Long term capital gain tax


Team Careers360 8th Jan, 2024
Answer (1)
Team Careers360 21st Jan, 2024

Correct Answer: Carbon tax


Solution : The correct option is the Carbon tax.

The carbon tax is a classic example of a Pigouvian tax. It is designed to internalise the external costs associated with carbon emissions and address the negative externality of climate change. By taxing carbon emissions, the government aims to make businesses and individuals take into account the environmental and societal costs of their carbon-intensive activities.

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