Final answer:
Policymakers apply taxes to finance government operations, redistribute income, and affect market outcomes, aiming for economic efficiency while raising necessary revenue. The correct option for why policymakers apply taxes is c. both b and c are correct.
Step-by-step explanation:
Policymakers apply taxes for a variety of reasons. One of the main reasons is to finance government expenditures. Taxes are necessary to cover the costs of government operations, public services, and infrastructure. Beyond this, taxes can also be used to redistribute income and address economic inequality. This redistribution can happen through progressive taxation where higher earners pay a larger percentage of their income in taxes or through tax credits and benefits targeted at lower-income individuals.
Moreover, taxes can influence the economy by affecting market outcomes and changing consumer behavior, such as discouraging negative externalities like pollution through carbon taxes or reducing consumption of unhealthy goods with sin taxes. However, policymakers must consider the potential negative effects of taxes, such as reduced spending and investment, altered behavior that can slow economic growth, and increased costs of production that can decrease supply.
Tax policy aims at balancing the necessity of raising revenue and the desire not to distort market efficiency too greatly. In this light, the correct answer to the question is c. b and c are correct, as policymakers apply taxes to affect market outcomes and try to make the market more efficient in addition to increasing the budget for government use.