Which of the following statements is correct?
A)Taxes are more difficult to administer than regulations.
B)Taxes provide incentives for firms to adopt new methods to reduce negative externalities.
C)Command-and-control policies provide incentives for private decisionmakers to solve their problems on their own.
D)Corrective taxes distort incentives.

Question

Quizplus · Accepted Answer

Corrective taxes, also known as Pigovian taxes, provide incentives for firms to reduce negative externalities by making them pay for the harms they cause. This encourages firms to innovate and invest in new methods to reduce their emissions or other sources of pollution. Taxes can be administered through various means, but they can be complex and difficult to enforce. Command-and-control policies, on the other hand, rely on direct regulation and can limit private decision-makers' ability to solve problems on their own. Despite their effectiveness in reducing negative externalities, corrective taxes can create some distortions in incentives, such as encouraging firms to produce less of the taxed good rather than finding ways to reduce its negative impacts.

Which of the Following Statements Is Correct