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High Quality Content by WIKIPEDIA articles! A Pigovian tax (also spelled Pigouvian tax) is a tax levied on a non-market activity that generates negative externalities; such a tax is intended to correct the market outcome. In the presence of negative externalities, the 'social cost' of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and the result may lead to over-consumption of the product. A Pigovian tax equal to the negative externality is thought to correct the market outcome.

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High Quality Content by WIKIPEDIA articles! A Pigovian tax (also spelled Pigouvian tax) is a tax levied on a non-market activity that generates negative externalities; such a tax is intended to correct the market outcome. In the presence of negative externalities, the 'social cost' of a market activity is not covered by the private cost of the activity. In such a case, the market outcome is not efficient and the result may lead to over-consumption of the product. A Pigovian tax equal to the negative externality is thought to correct the market outcome.