Question

When the government imposes a corrective tax, the market produces a socially optimal quantity, but there is a welfare loss becauseI. there is a decrease in consumer surplusII. there is a decrease in producer surplusIII. the tax decreases employees' incentives to work

Answer 1

Answer:TRUE

Explanation:Corrective taxes are taxes imposed on the certain goods and services rendered within an Economy such the production of some harmful substances and foods. This tax will Decrease the surplus of producers to produce more making it more expensive to produce such goods.

It will also Decrease consumer surplus as the increased taxes will make the producers to increase the price of the product.

Workers Incentive will be reduced as a result of an increase in the cost of production.