Article Summary In 2012, Colorado and Washington Legalized Marijuana for Recreational Use

question 249

Multiple Choice

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.
-Between 1980 and 2011, income inequality in the United States has increased in part due to rapid technological change. How does technological change contribute to income inequality?

• A) Advancements in technology displace skilled and unskilled workers in certain fields, leading to higher unemployment rates.
• B) Technology complements the skills of the well-educated while rendering redundant the labor services of unskilled and low-skilled workers. This causes a decline in the wages of low and unskilled workers relative to other workers.
• C) The opportunity cost of investing in technology is investments in human capital. The resulting decrease in labor's marginal productivity has led to lower wages.
• D) Technological change favors the owners of capital and since high income individuals tend to own capital, income inequality is further exacerbated.

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