Which of the following taxes is an example of Pigouvian tax?

tax on petrol

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income tax

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tax on cigarettes

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tax on medicines

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Solution

The correct option is C
tax on cigarettes

Pigouvian taxes are used to decrease supply to socially optimal levels. In this case, decreasing the supply of cigarettes leads to a socially optimum outcome.

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Similar questions

A Pigouvian Tax = a tax on a good with external costs.

Income tax, corporate tax, inheritance tax etc. are incident on the person or organisation. These taxes are called:

Tax levied on value of total assets owned by an individual is income tax.

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