Final answer:
A Pigovian tax is levied to address the negative externalities caused by goods or activities, setting the tax equal to the social cost of these externalities. The correct option is a.
Step-by-step explanation:
A tax designed to induce people to take account of the negative externalities that they cause is referred to as a Pigovian tax. This type of tax is intended to correct an inefficient market outcome, and it does so by being set equal to the social cost of the negative externalities.
Common examples include taxes on pollution, where the tax is equivalent to the estimated harm to society from the pollution caused. In contrast, regressive taxes like excise taxes on gasoline and tobacco, or sales taxes, tend to place a higher burden on those with lower income since they pay the same amount regardless of their earnings, which constitutes a higher proportion of their income. Progressive taxes, such as the federal income tax, scale with the ability to pay, meaning higher income earners pay a larger percentage of their income in taxes.