A carbon tax placed on coal will
A) shift the supply curve for coal to the right.
B) shift the supply curve for coal to the left.
C) not affect the supply curve for coal.
D) decrease the demand for coal.

Question

Quizplus · Accepted Answer

A carbon tax placed on coal would increase its cost of production, which would lead to a decrease in supply. This is because producers would have to pay the tax, which would increase their costs and reduce their profitability. Therefore, a carbon tax would shift the supply curve for coal to the left. It would not affect the demand for coal directly, but it could indirectly decrease demand if alternative energy sources become more cost competitive as a result of the tax.

A Carbon Tax Placed on Coal Will