All of the Following Statements About Legalizing and Taxing Drugs

question 4

Multiple Choice

All of the following statements about legalizing and taxing drugs are true except

• A)legalizing and taxing drugs would eliminate the black market in drugs.
• B)the quantity of a drug bought could be decreased if the drug was legalized and taxed.
• C)a sufficiently high tax could be imposed to decrease supply,raise the price,and achieve the same decrease in the quantity bought as with a prohibition of drugs.
• D)an extremely high tax rate would be needed to cut the quantity of drugs bought to the level prevailing with a prohibition.
• E)tax revenue can be used to make law enforcement more effective.

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Definitions:

Minimize Losses

A strategy employed to reduce the amount of loss in financial, operational, or other terms as much as possible.

Perfect Competition

A market structure where many firms offer products or services that are similar, leading to a level playing field.

Product Differentiation

The act of setting a product or service apart from those in the market to enhance its attractiveness to a certain target group.

Demand Curves

A graphical representation showcasing the relationship between the price of a good or service and the quantity demanded by consumers at various price levels.