Internalizing an externality with a Pigovian tax will ... a. increase consumer surplus but reduce producer surplus. b. Reduce consumer surplus but increase producer surplus. c. increase total social costs. d. result in a net social loss. e. result in a net social gain.

e. result in a net social gain.

Explanation:

Taxation can be defined as the involuntary or compulsory fees levied on individuals or business entities by the government to generate revenues used for funding public institutions and activities.

The different types of tax include the following;

1. Income tax: a tax on the money made by workers in the state. This type of tax is paid by employees with respect to the amount of money they receive as their wages or salary.

2. Property tax: a tax based on the value of a person's home or business. It is mainly taxed on physical assets or properties such as land, building, cars, business, etc.

3. Sales tax: a tax that is a percent of the price of goods sold in retail stores. It is being paid by the consumers (buyers) of finished goods and services and then, transfered to the appropriate authorities by the seller.

A positive externality arises when the production or consumption of a finished product or service has a significant impact or benefits to a third party that isn't directly involved in the transaction.

On the other hand, a negative externality arises when the production or consumption of a finished product or service has negative impact (cost) on a third party.

Internalizing an externality with a Pigovian tax will result in a net social gain.

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