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

Demand would increase.
Demand would increase.

Supply would decrease.
Supply would decrease.

Supply would increase.
Supply would increase.

Demand would decrease.

Answer 1

The correct response is:

Supply would decrease.

When the government imposes a tax on producers for producing plastic grocery bags, it increases the cost of production. As a result, it becomes more expensive for producers to supply these bags, leading to a decrease in the overall supply of plastic grocery bags in the market. This decrease in supply can lead to higher prices for consumers and potentially lower quantities of bags available in the market.