Question

A corrective tax Select one: a. allocates pollution to those factories that face the highest cost of reducing it. b. works well for all types of externalities. c. is inferior to regulatory policy according to most economists. d. is a form of regulation.

Answer 1

Answer:

A) allocates pollution to those factories that face the highest cost of reducing it.

Explanation:

The purpose of corrective taxes is to mitigate and reduce the effects of negative externalities.

Negative externalities happen when innocent third parties are injured or suffer due to transactions carried out by other parties that do not include them.

Corrective taxes try to improve the well being of society and economic efficiency, and the most common examples are

The most famous type of corrective taxes are called Pegouvian taxes (developed by Pigou in 1920) and they focus on environmental issues. Pigou developed the concept of using taxes to correct negative environmental externalities such as pollution. E.g. they give factory owners an economic incentive to reduce pollution.

Answer 2

Answer:

d. is a form of regulation.

Explanation:

A corrective tax is a market-based policy option used by the government to address negative externalities. Thus, the tax on these negative externalities is increased and thus could cause decreased production