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.