Corrective taxes differ from most taxes in that corrective taxes
A)reduce economic efficiency.
B)do not raise revenue for the government.
C)do not cause deadweight losses.
D)always result in a high burden on sellers of goods to which the corrective tax applies.

Question

Quizplus · Accepted Answer

Corrective taxes are also known as Pigovian taxes, and are implemented to discourage behaviors that are harmful to society, such as pollution or excessive consumption of goods with negative externalities. The aim of corrective taxes is to internalize the external costs associated with these behaviors, by increasing the price of the good or activity to reflect its true social cost. This can lead to a reduction in the quantity consumed, which is the intended outcome. However, since the tax is designed to correct a market failure, it can actually increase economic efficiency by aligning private costs with social costs. Additionally, the revenue generated from these taxes can be used to offset any negative impacts on society. Therefore, corrective taxes do not cause deadweight losses, and can actually benefit society as a whole.

Corrective Taxes Differ from Most Taxes in That Corrective Taxes