Corrective taxes are unlike most other taxes because they
A)distort incentives.
B)move the allocation of resources away from the social optimum.
C)raise revenue for the government.
D)move the allocation of resources closer to the social optimum.

Question

Quizplus · Accepted Answer

Corrective taxes, also known as Pigouvian taxes, are designed to correct negative externalities in markets by making goods and services more expensive if they have harmful effects on society. By increasing the price of these goods, corrective taxes encourage producers and consumers to reduce their consumption or production, which in turn moves the allocation of resources closer to the social optimum. This is unlike most other taxes, which typically distort incentives and move the allocation of resources away from the social optimum. While corrective taxes do raise revenue for the government, their primary purpose is to internalize external costs and improve overall welfare.

Corrective Taxes Are Unlike Most Other Taxes Because They