Correct statements about Pigovian tax: A. Internalises total cost of an activity into the market B.…

A Pigovian tax is a corrective tax levied on market activities that generate negative externalities (such as pollution). Statement A is correct because setting the tax equal to the marginal external cost internalises the full social cost of the activity into market prices and private decisions. Statement B is correct because taxing emissions or pollution-intensive output provides a direct economic incentive to reduce pollutant production. Statement C is false because a Pigovian tax corrects an externality distortion rather than raising physical factor productivity, and Statement D is false because a severance tax is a tax on the extraction of non-renewable natural resources rather than an externality-correcting Pigovian tax. Therefore, ('A,B only') is correct.