Asked by Ma Michelle Sison on Apr 26, 2024
Verified
Corrective taxes cause deadweight losses, reducing economic efficiency.
Deadweight Losses
Losses in total surplus that occur when a market is not in competitive equilibrium, often due to taxes or subsidies.
Economic Efficiency
A situation where all resources are allocated in a way that maximizes the total benefit to society or minimizes waste.
- Gain an understanding of how corrective taxes and subsidies influence economic efficiency and the financial inflows to the government.
Verified Answer
TS
Theresa ShekeltonMay 01, 2024
Final Answer :
False
Explanation :
Corrective taxes, also known as Pigouvian taxes, are designed to correct for externalities and can lead to a more efficient market outcome by internalizing external costs, thus potentially reducing deadweight losses rather than causing them.
Learning Objectives
- Gain an understanding of how corrective taxes and subsidies influence economic efficiency and the financial inflows to the government.
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