Most economists prefer corrective taxes to regulation to correct the pollution problem because:
A) the market-based solution is less costly to society.
B) the market-based solution can result in a greater reduction in pollution.
C) the market-based solution raises revenue for the government.
D) all of the above.

Question

Quizplus · Accepted Answer

Corrective taxes are a market-based solution that internalizes the cost of pollution into the price of the good, thus providing an incentive for firms to reduce pollution. This makes it less costly for society as a whole to reduce pollution. It can also result in a greater reduction in pollution because firms have the flexibility to reduce pollution in the most cost-effective way. Additionally, the revenue generated from corrective taxes can be used for government programs or to reduce other taxes, providing an additional benefit. Therefore, economists prefer corrective taxes over regulation to correct the pollution problem.

Most Economists Prefer Corrective Taxes to Regulation to Correct the Pollution