A corrective tax leads:

Question

Quizplus · Accepted Answer

A corrective tax is designed to internalize external costs and benefits, which means that individuals or firms are forced to pay the full costs of their actions. This increases the efficiency of the market by creating a more accurate price for goods and services that reflects their true social costs. The tax adjusts the private cost to include the social cost, leading to a reduction in negative externalities and an increase in positive externalities. There is no need for offsetting subsidies as the corrective tax addresses the problem directly. Coase Theorem-based solutions rely on private bargaining and do not involve the government intervention that a corrective tax entails.

A Corrective Tax Leads