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Do you agree with the following statements? Why or why not?a. The benefits of Pigovian taxes as a way to reduce pollution have to be weighed against the deadweight losses that these taxes cause.b. A negative production externality calls for a Pigovian tax on producers, whereas a negative consumption externality calls for a Pigovian tax on consumers.
a) The statement:- The benefits of pigovian as a way to reduce pollution have to be weighed against the deadweight losses that these taxes causes is False. In fact, pigovian taxesreduce the inefficiency of the pollution by reducing the quantity of the good being produced that has pollution as a byproduct. So pigovian taxes reduce deadweight losses, they do not increase it. b) when deciding the levy of taxes on the consumers or producers the governments decision is based on the fact which party has generated the…

externality. But this statement is in accurate. Because it does not matter whether consumers or producers has generated the externality and whom the tax is imposed, the incidence of taxes will be identical. So whether taxes are imposed on consumers or buyers same reduction in quantity and change in the prices which producers receive or buyers pay is done.



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