A corrective tax
A) can be used to internalize a negative externality.
B) imposed on sellers shifts the supply curve to the left.
C) imposed on buyers shifts the demand curve to the left.
D) All of the above.

Question

Quizplus · Accepted Answer

A corrective tax is a type of market-based instrument used to correct market failures caused by negative externalities. It can be imposed on either sellers or buyers to internalize the cost of the negative externality. When imposed on sellers, it increases the cost of producing the good, which shifts the supply curve to the left. When imposed on buyers, it increases the cost of consuming the good, which shifts the demand curve to the left. Therefore, all of the above options are correct.

A Corrective Tax