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?
A.
Demand would decrease.
B.
Supply would increase.
C.
Demand would increase.
D.
Supply would decrease.
D. Supply would decrease.
When a tax is imposed on producers of plastic grocery bags, it raises their cost of production. This would likely result in a decrease in the supply of plastic grocery bags, as producers may reduce their production in response to the tax. This could ultimately lead to higher prices for plastic grocery bags and potentially a decrease in demand as well.