Discussion
Who suggested imposition of a tax, known today as corrective tax to tackle negative externalities?
Answer: D
A tax to correct a negative externality is known as a Pigouvian tax after Arthur Pigou, who proposed it in The Economics of Welfare (1920). Ronald Coase argued for bargaining over property rights, Akerlof wrote on asymmetric information (the market for lemons) and Pareto gave the criterion of efficiency. The answer is Arthur Pigou, option D. The Pigouvian tax is set equal to the marginal external cost, so that the producer faces the full social cost.
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