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barry1999 barry1999
wrote...
Posts: 349
A week ago

Article Summary

Monthly marijuana sales in Colorado topped $100 million for the first time in August, 2015, with $59.2 million in recreational sales and $41.4 million in medical sales. Colorado has levied three types of state taxes on recreational-use marijuana: a 2.9% standard sales tax, a 10% special marijuana sales tax, and a 15% excise tax on wholesale marijuana transfers. The 15% excise tax is earmarked for school construction projects. In August, recreational-use taxes and fees totaled $11.2 million and medical taxes and fees were $2 million, bringing total revenue-to-date for the year to over $86 million.

Source: Elizabeth Hernandez, "Colorado monthly marijuana sales eclipse $100 million mark," Denver Post, October 9, 2015.



Refer to the Article Summary above. Colorado taxes marijuana with a 12.9% sales tax on buyers and a 15% wholesale excise tax on producers, which equates to 46 percent of the total taxes paid by retail buyers and 54 percent paid by producers. Does this necessarily mean that buyers will bear 46 percent of the burden of the tax and producers will bear 56 percent of the burden?



No, because consumers and producers always bear equal burdens of a tax.



Yes, the percentage of taxes paid by each group represents the burden of the tax.



No, the burden of a tax is always 100 percent on the consumer.



No, the burden of the tax will depend on the elasticity of demand and supply.

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Edition: 1st
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8 Replies
Replies
wrote...
A week ago

No, the burden of the tax will depend on the elasticity of demand and supply.

wrote...
A week ago

Article Summary

Monthly marijuana sales in Colorado topped $100 million for the first time in August, 2015, with $59.2 million in recreational sales and $41.4 million in medical sales. Colorado has levied three types of state taxes on recreational-use marijuana: a 2.9% standard sales tax, a 10% special marijuana sales tax, and a 15% excise tax on wholesale marijuana transfers. The 15% excise tax is earmarked for school construction projects. In August, recreational-use taxes and fees totaled $11.2 million and medical taxes and fees were $2 million, bringing total revenue-to-date for the year to over $86 million.

Source: Elizabeth Hernandez, "Colorado monthly marijuana sales eclipse $100 million mark," Denver Post, October 9, 2015.



Refer to the Article Summary above. Colorado taxes marijuana with a 12.9% sales tax on buyers and a 15% wholesale excise tax on producers, or a total tax of 27.9% 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 about ________ percent of the selling price and producers will actually bear the tax burden of ________ percent of the selling price.



13; 15



22; 6



80; 20



46; 54

Answer verified by a subject expert
Niquegirl21!Niquegirl21!
wrote...
Posts: 304
A week ago
Sign in or Sign up in seconds to unlock everything for free.

22; 6

1

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wrote...
A week ago
Thanks for your help!
wrote...
A week ago

Article Summary

Monthly marijuana sales in Colorado topped $100 million for the first time in August, 2015, with $59.2 million in recreational sales and $41.4 million in medical sales. Colorado has levied three types of state taxes on recreational-use marijuana: a 2.9% standard sales tax, a 10% special marijuana sales tax, and a 15% excise tax on wholesale marijuana transfers. The 15% excise tax is earmarked for school construction projects. In August, recreational-use taxes and fees totaled $11.2 million and medical taxes and fees were $2 million, bringing total revenue-to-date for the year to over $86 million.

Source: Elizabeth Hernandez, "Colorado monthly marijuana sales eclipse $100 million mark," Denver Post, October 9, 2015.



Refer to the Article Summary above. 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.

wrote...
A week ago

For retailers to bear the entire burden of this tax, the demand for marijuana would have to be perfectly elastic. Most studies indicate that the demand for marijuana is inelastic, so this would likely not occur.

The graph shows a perfectly elastic demand curve, which is necessary for the seller to bear the entire burden of the tax. Without the $50-per-ounce tax, equilibrium is at Point A, with a price of P1 and a quantity of Q1. The $50-per-ounce tax would shift the supply curve up to S2, creating a new equilibrium at Point B, with a price of P1 and a quantity of Q2. Since demand is perfectly elastic, the selling price does not change with the addition of the tax. The amount the retail outlet would receive after paying the $50-per-ounce tax is represented by P2, which is exactly $50 less than the selling price of P1.

wrote...
A week ago
This site is awesome!
wrote...
A week ago
Slight Smile Good luck on the rest
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