A tax will sometimes alter consumers' incentives. Which of the following statements about such a tax is true? This type of tax is meant to increase consumption. A tax designed to raise revenue may sometimes alter consumer incentives as a side effect. This type of tax is called a sin tax.

Question

Quizplus · Accepted Answer

A tax designed to raise revenue may sometimes alter consumer incentives as a side effect, which is true. Taxes meant to increase consumption or called sin taxes are not accurately described in the context of altering consumer incentives. Sin taxes are typically imposed to discourage consumption of certain goods.

A Tax Will Sometimes Alter Consumers' Incentives