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

Question

Quizplus · Accepted Answer

Corrective taxes are implemented with the purpose of correcting market failures such as negative externalities, and as such, they are designed to internalize external costs and bring economic efficiency. Unlike most taxes, whose main purpose is to raise revenue for the government, corrective taxes aim to improve market outcomes by modifying consumer and producer behavior. While corrective taxes can cause deadweight loss in some cases, this is a side effect of the policy and not its purpose. Corrective taxes can also be divided between the buyer and seller, depending on the elasticity of demand and supply.

How Do Corrective Taxes Differ from Most Taxes