Final answer:
A government tax on a new medicine to cure hiccups would decrease the supply of the medicine because the tax increases production costs, thus decreasing the willingness of suppliers to provide the medicine at each price.The right answer is B)
Step-by-step explanation:
If the government charges a tax on a new medicine to cure hiccups, this would likely decrease the supply of the medicine. Taxes are treated as additional costs by businesses, and higher costs tend to decrease supply because they reduce profit margins. In the context of the scenario presented, the correct answer would be B) Decrease the supply. This is because the tax would raise the cost of producing the medicine, making it less profitable at the original price, and therefore suppliers would be willing to supply less of the medicine at each price.
For example, if you consider the government imposition of a soda tax to curb obesity, a reduction in the soda tax would increase the supply of sodas since producers would face lower costs. Analogously, the tax on your company's hiccups medicine would have the opposite effect by increasing costs, reducing the medicine's supply.