Why are corrective taxes unlike most other taxes
A)They distort incentives.
B)They move the allocation of resources away from the social optimum.
C)They raise revenue for the government.
D)They move the allocation of resources closer to the social optimum.

Question

Quizplus · Accepted Answer

Corrective taxes, also known as Pigouvian taxes, are unlike most other taxes because they aim to correct negative externalities by internalizing the costs of these externalities. By doing so, they move the allocation of resources closer to the social optimum by encouraging individuals and firms to take into account the true costs of their actions. Therefore, option D is the correct answer. Options A and B are characteristics of most taxes, while option C is not always true for corrective taxes as their primary goal is not revenue generation but rather correcting externalities.

Why Are Corrective Taxes Unlike Most Other Taxes