Corrective taxes differ from most taxes in that corrective taxes
A) enhance economic efficiency.
B) do not raise revenue for the government.
C) cause deadweight loss.
D) cannot be divided between the buyer and seller.

Question

Quizplus · Accepted Answer

Corrective taxes are designed to discourage negative externalities and encourage positive externalities, ultimately leading to an improvement in economic efficiency. By internalizing the costs or benefits that are otherwise not accounted for in market transactions, corrective taxes can improve the allocation of resources and promote socially desirable outcomes. While they may generate some revenue for the government, their primary purpose is not to raise funds but rather to correct market failures. Deadweight loss can occur if the tax rate is set too high, but this is not inherent to corrective taxes themselves. Corrective taxes can be levied on either the buyer or the seller, depending on the specific policy goal and how the tax is designed.

Corrective Taxes Differ from Most Taxes in That Corrective Taxes