Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
The tax will increase the supply of plastic bags, leading to lower prices for consumers.
B
The tax will increase the marginal cost for producers, likely reducing the supply of plastic bags and increasing prices for consumers.
C
The tax will have no impact on the supply since producers can absorb the cost without changing their behavior.
D
The tax will directly decrease demand for plastic bags without affecting supply.
Understanding the Answer
Let's break down why this is correct
Answer
When the local government imposes a per-unit tax on plastic bags, it makes these bags more expensive for consumers. As a result, some people may decide to buy fewer plastic bags or even switch to reusable bags to avoid the extra cost. Producers, on the other hand, might reduce the supply of plastic bags because they know fewer people will buy them due to the tax, which could lead to higher prices in the market. For example, if a plastic bag costs $0. 10 and the tax adds $0.
Detailed Explanation
The tax makes it more expensive for producers to make plastic bags. Other options are incorrect because This answer suggests that a tax would help produce more bags, which is not true; This answer assumes producers can just ignore the tax.
Key Concepts
Per-unit taxes
Market efficiency
Negative externalities
Topic
Understanding Per-Unit Taxes
Difficulty
medium level question
Cognitive Level
understand
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