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?(1 point)

Question

Responses

Supply would increase.
Supply would increase.

Supply would decrease.
Supply would decrease.

Demand would increase.
Demand would increase.

Demand would decrease.

Answer 1

The correct response is:

Supply would decrease.

When a tax is imposed on producers, it increases the cost of production. As a result, producers are likely to supply fewer grocery bags at the same price, leading to a decrease in supply.