A corrective tax
A)causes each factory to reduce pollution by the same amount.
B)assigns a legal pollution limit for firms.
C)places a price on the right to pollute.
D)costs society more than pollution regulations.

Question

Quizplus · Accepted Answer

A corrective tax places a price on the right to pollute, which provides an incentive for firms to reduce pollution to avoid paying the tax. It does not assign a legal limit for pollution and does not cause each factory to reduce pollution by the same amount. Additionally, a well-designed corrective tax can actually be more cost-effective for society than pollution regulations.

A Corrective Tax