Pigouvian tax

Feature image explaining a negative externality diagram, showing how a Pigouvian tax shifts output from the private equilibrium to the social optimum and recovers deadweight loss.

Microeconomics

Negative Externality Diagram: Taxes and Welfare Loss

The negative externality diagram shows how a Pigouvian tax set at marginal external cost shifts supply to MSC, eliminating the...

May 24, 2026