Suppose the government decides to raise the gasoline tax

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Suppose the government decides to raise the gasoline tax as a way of reducing air pollution and traffic congestion to their optimal levels. Which of the following describes why Pigovian taxes, such as gasoline tax, are unlike most other taxes?

Other taxes are typically used to cover general spending, but funds from corrective taxes can only be used to alleviate pollution

Corrective taxes bring the allocation of resources closer to the social optimum, and thus improve economic efficiency

Other taxes get passed on from businesses to consumers, whereas corrective taxes do not

Correct taxes alter incentives, whereas other taxes typically do not.

Reference no: EM13741118

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