There has been much discussion over whether marijuana should be legalized. Assume that if it becomes legal the price will be cut in half. Given your text estimate of -1.0 price elasticity for marijuana, what would you expect to be the change in marijuana usage?
A. It will double.
B. It will not change.
C. It will be cut in half.
D. It will increase by 50%.
Answer: D
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If a country's central bank does not intervene in the foreign exchange market, the country has
A) a crawling peg exchange rate policy. B) a fixed exchange rate policy. C) a flexible exchange rate policy. D) no exchange rate policy.
Overproduction compared to the efficient amount implies that for the last unit produced
A) marginal social benefit exceeds marginal social cost. B) marginal social benefit equals marginal social cost. C) marginal social cost exceeds marginal social benefit. D) the deadweight loss is zero.
During the last decade, the price of shoes rose substantially yet people bought more pairs of new shoes each year. This experience suggests that the
A) supply curve of shoes shifted leftward. B) demand curve for shoes shifted leftward. C) supply curve of shoes shifted rightward. D) demand curve for shoes shifted rightward.
When a domestic currency is completely backed by a foreign currency and the note-issuing authority establishes a fixed exchange rate to this foreign currency, then the country is said to have
A) created a currency board. B) undergone dollarization. C) adopted a managed exchange system. D) adopted an exchange rate monetary system.