1. If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the (1 pt)
a. supply for marijuana is elastic.
b. demand for marijuana is elastic.
c. supply for marijuana is inelastic.
d. demand for marijuana is inelastic.
2. State the determinants of the Price Elasticity of Supply and give an example (2 points for each determinant for a total of 4 points)
10. Answer each of the following questions about demand and consumer surplus. (8 points total)
a. What is consumer surplus, and how is it measured? (2 points)
b. What is the relationship between the demand curve and the willingness to pay? (1 point)
c. Other things equal, what happens to consumer surplus if the price of a good falls? Why? Illustrate using a demand curve. (3 points)
d. In what way does the demand curve represent the benefit consumers receive from participating in a market? In addition to the demand curve, what else must be considered to determine consumer surplus? (2 points)