Asked by Minmint Vanichvorasakul on Jul 12, 2024
Verified
Because taxes distort incentives, they cause markets to allocate resources inefficiently.
Inefficently
Operating in a manner that does not maximize productivity or use resources in the best possible manner.
Taxes
Imperative monetary contributions or distinct types of taxation demanded from a taxpayer by a public authority to cover the costs of governmental functions and diverse public financial needs.
Incentives
Motivators or stimuli that encourage or promote certain behaviors or actions by offering rewards or benefits.
- Understand how taxes influence incentives and the allocation of resources.
Verified Answer
EN
Eshna NagpalJul 14, 2024
Final Answer :
True
Explanation :
Taxes can distort incentives by making certain activities more expensive or less profitable, leading to changes in behavior and potentially causing markets to allocate resources in ways that are not as efficient as they would be in the absence of taxes.
Learning Objectives
- Understand how taxes influence incentives and the allocation of resources.