Most Taxes Distort Incentives and Move the Allocation of Resources

question 32

Multiple Choice

Most taxes distort incentives and move the allocation of resources away from the social optimum. Why do corrective taxes avoid the disadvantages of most other taxes?

• A)Corrective taxes apply only to goods that are bad for people's health, such as cigarettes and alcohol.
• B)Because corrective taxes correct for market externalities, they take into consideration the well-being of bystanders.
• C)Corrective taxes provide incentives for the conservation of natural resources.
• D)Corrective taxes do not affect deadweight loss.

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Definitions:

Facial Expressions

The movements of the facial muscles that convey emotions, intentions, and social information to others.

Tactile Sense

The sense of touch, which enables organisms to perceive and interpret information through physical interaction with their environment.

Preparedness

Predisposition to respond to certain stimuli differently from other stimuli.

Selective Learning

The process by which individuals learn some information while ignoring other stimuli, often emphasizing relevant or reinforced knowledge.