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

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 expanding international trade. How does expanding international trade contribute to income inequality?

A) It increases the demand for a wide array of products which in turn increases prices beyond the reach of average income individuals.
B) It allows producers to exploit workers and reduce the wages they are willing to pay workers.
C) Domestic firms can now hire low-skilled workers anywhere in the world, putting U.S. workers in competition with foreign workers. This has caused the wages of unskilled workers to be depressed relative to the wages of other workers.
D) It reduces the cost of producing goods and therefore lowers the value of labor's services.