A government official proposes taxing producers of plastic grocery bags at 10 cents per plastic bag. What effect would the tax have on the market for grocery bags?

Question

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1 point
Supply would increase.
Supply would decrease.
Demand would decrease.
Demand would increase.

Answer 1

The proposed tax on producers of plastic grocery bags would typically lead to an increase in production costs for those producers. As a result, the supply of plastic grocery bags would decrease because producers would be less willing or able to supply the same quantity at the same price.

So, the correct answer is: Supply would decrease.