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:

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A legal principle under the Fourteenth Amendment of the U.S. Constitution, ensuring that no state shall deny to any person within its jurisdiction the equal protection of the laws.

Suspect Class

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