Article Summary. In 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.
Colorado is weighing a proposal to tax marijuana at 30 percent, of which 15 percent
would be a sales tax on consumers and 15 percent would be an excise tax on growers.
Suppose the actual burden of the tax falls 80 percent on consumers and 20 percent on
producers. In this case, consumers will actually bear the tax burden of ________
percent of the selling price and producers will actually bear the tax burden of ________
percent of the selling price.
A) 24; 6
B) 50; 50
C) 15; 15
D) 80; 20
If the price of refillable butane lighters was to decrease, then
A) the demand for butane would decrease.
B) the demand for butane would increase.
C) the quantity of butane demanded would increase.
D) the quantity of butane demanded would decrease.
Which of the following is one explanation as to why the aggregate demand curve slopes
downward?
A) Increases in the price level lower the interest rate and decrease consumption
spending.
B) Increases in the price level lower the interest rate and decrease investment spending.
C) Increases in the U.S. price level relative to the price level in other countries lowers
net exports.
D) Increases in the price level raise real wealth and lowers consumption spending.
The median voter theorem states that the outcome of a majority vote
A) tends to favor the preferences of high income individuals and ignore the median
voter.
B) is likely to represent the preferences of society’s middle-income voter.
C) is likely to represent the preferences of the voter who is in the political middle.
D) is determined by the average consumer and producer in an economy.
Textbook examples of trade between two nations are simplified in order to show how
two nations both benefit from trade. These examples are misleading because
A) in the real world, rich countries can take advantage of poor countries.
B) they do not account for the reduction in wages that occurs in both countries as a
result of trade.
C) some individuals in both countries may be made worse off because of trade.
D) trade restrictions are likely to be imposed as trade grows over time.
If nominal GDP exceeds real GDP for a specific year, then the GDP deflator must be
A) equal to 100.
B) greater than 100.
C) less than 100.
D) less than 0.
A change in tax rates
A) has a less complicated effect on GDP than does a tax cut of a fixed amount.
B) has a larger multiplier effect the smaller the tax rate.
C) will not affect disposable income.
D) will not affect the size of the multiplier.
Which of the following would be most likely to induce Congress and the president to
conduct contractionary fiscal policy? A significant
A) decrease in oil prices.
B) decrease in real GDP.
C) increase in inflation.
D) increase in labor productivity.
Congress passed the Clean Air Act in 1970. Since this act was passed, emissions of the
six main air pollutants
A) have fallen by more than one-half.
B) have increased significantly due to the growth of the U.S. economy.
C) cannot be measured since Congress failed to appropriate money to monitor the level
of emissions.
D) have remained essentially constant, even though significant economic growth has
occurred in the United States since 1970.
To affect the market outcome, a price ceiling
A) must be set below the black market price.
B) must be set below the legal price.
C) must be set below the price floor.
D) must be set below the equilibrium price.
The total amount of physical capital available in a country is know as the country’s
A) labor productivity.
B) savings.
C) investment.
D) capital stock.
Economists who believe the supply-side effects of tax cuts are small essentially believe
that
A) tax cuts mainly affect aggregate demand.
B) tax cuts mainly affect aggregate supply.
C) tax cuts will increase the quantity of labor supplied.
D) tax cuts will result in relatively small changes in the price level.
When deciding on which new products to develop, a firm must devote people, time, and
money to designing a new product. Because any firm has only limited resources, it
A) should wait until its competitors develop a similar product before deciding on
devoting resources to its own product development.
B) is not able to develop more than one new product at a time.
C) must be certain that the product it chooses to develop will be successful or it will not
be able to stay in business.
D) faces a trade-off, because resources used to develop one product will not be
available to develop another product.
Which of the following criteria would make gold a poor medium of exchange?
A) Its value depends on its purity, and its purity is not easy to visibly identify.
B) durability so that value is not lost by spoilage
C) value relative to its weight so that amounts large enough to be useful in trade can be
easily transported
D) divisibility because different goods are valued differently
Suppose the federal budget deficit for the year was $100 billion and the economy was
in a recession. If the economy had been at potential GDP, it is estimated that tax
revenues would have been $60 billion higher and government spending on transfer
payments $50 billion lower. Using these estimates, the cyclically adjusted budget
A) deficit was $210 billion.
B) deficit was $110 billion.
C) surplus was $10 billion.
D) surplus was $110 billion.
Whenever a buyer and a seller agree to trade, both must believe they will be made
better off
A) unless the buyer resides in a different country than the seller resides in. International
trade may make the buyer or seller worse off.
B) unless one party is richer than the other.
C) only if the buyer and seller live in countries with market economies.
D) whether the buyer and seller live in the same city or different countries.