If a Pigovian tax is levied on producers,the supply curve will shift:
A) straight up, decreasing quantity.
B) straight down, decreasing quantity.
C) straight up, increasing quantity.
D) straight down, increasing quantity.

Question

Quizplus · Accepted Answer

When a Pigovian tax is levied on producers, the cost of production increases, which leads to a decrease in supply. As a result, the supply curve shifts straight up, decreasing the quantity supplied. Therefore, the correct choice is A.

If a Pigovian Tax Is Levied on Producers,the Supply Curve