Suppose in an Effort to Raise Tax Revenue, British Columbia

question 66

Essay

Suppose in an effort to raise tax revenue, British Columbia decides to legalize the sale of marijuana.The province will charge a tax of $10 per gram on each sale, and the province claims 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 $10 per gram 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 actually legalized.

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Definitions:

Federal Outlays

Government spending or expenditures, including on services, social security, defense, and interest on debt.

Stock Variable

A measurement at a specific point in time, such as the amount of money in a bank account or stock of goods.

Flow Variable

A variable that is measured over a specific period of time, representing dynamic elements of an economy like income or spending.

Federal Budget Deficit

The deficit occurring when government spending surpasses its income in a specific fiscal year.