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Pigovian taxes are said to have no deadweight losses. (i) Draw an illustrating example and demonstrate...

Pigovian taxes are said to have no deadweight losses. (i) Draw an illustrating example and demonstrate that there are no deadweight losses from a Pigovian tax, because social net benefits are increased rather than reduced by such taxes (assuming that the tax revenues are not wasted). (ii) Show that a tax on an externality generating activity that is too high (above Pigovian levels) will have a dead weight loss.

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