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Question
Article SummaryIn 2012, Colorado and Washington legalized marijuana for recreational use, and one of the major selling points in each state's pro-marijuana campaign was the possibility of generating millions of dollars in tax revenue from sales which could be used for funding general education. The Colorado legislature was weighing a proposal to tax marijuana at 30 percent, of which 15 percent would be a sales tax on consumers and 15 percent an excise tax on growers. Washington has set a tax rate of 44 percent on consumers and 25 percent each for growers and retailers. Since the legalization of marijuana is relatively new, projecting the economic impact of its sale is difficult, leading to many questions as to the quantities that will be produced and sold and what actual tax revenues will be generated.
Source: Elizabeth Dwoskin, "Colorado and Washington Try to Figure Out How to Tax Marijuana," Bloomberg Businessweek, April 26, 2013.
Refer to the Article Summary. Suppose the sale of marijuana is legalized in Florida, and the state decides to charge a tax of $50 per ounce on each sale, with the state claiming that retailers will bear the entire burden of this tax. Draw a graph illustrating the situation where retail outlets would bear the entire tax burden of $50 per ounce of marijuana. Explain what would need to be true about the demand for marijuana for retailers to bear the entire burden of this tax, and if this would likely occur if marijuana sales were legalized.
Answer
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Related questions
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If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.
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A) is the same thing as its long-run average cost curve.
B) is a curve that shows a firm's cost-minimizing combination of inputs for every level of output, holding input prices constant.
C) shows the targeted growth rate in sales over the long run.
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Suppose two countries use different combinations of inputs, such as labor and capital, to produce the same product. This implies all of the following except that
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A) its profits increase.
B) its revenue increases.
C) its input price ratio increases.
D) its total cost increases.
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A) the slope of the isoquant.
B) the relative input prices.
C) the slope of the isocost line.
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The typical shape of an isoquant is
A) convex towards the origin.
B) concave towards the origin.
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D) linear and upward sloping.
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A) the level of sales necessary for a firm if it wants to expand.
B) the level of long-run average cost at different scales of operation.
C) the least-cost combination of inputs for each level of output.
D) the returns to scale at each level of output.
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A) is equivalent to producing the profit maximizing output level.
B) is equivalent to minimizing cost for a given level of output.
C) necessitates using only relatively low-priced inputs.
D) will maximize total revenue.
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A) $80,000
B) $70,000
C) $42,000
D) $41,500
Q:
Which of the following would be categorized as an opportunity cost?
a. not being able to spend your $10,000 savings if you sink the money in your business
b. the cost of purchasing supplies for your house-cleaning business
c. the cost of purchasing auto insurance for your dry-cleaning delivery business
A) a only
B) a and c only
C) b and c only
D) all of the above