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Cost-Benefit Analysis

Cost-Benefit Analysis

Q As your initial post, 1. Using the principles of cost-benefit analysis, discuss the benefits to consumers who would participate in the market for legalized marijuana. Discuss the benefits to firms who would participate in the market for legalized marijuana. 2. While consumers would pay the market price in the market for legalized marijuana, is that the only source of total cost to consumers? Is it the total cost to society (i.e. any consumer-oriented externalities)? 3. While firms would have to pay for inputs to participate in the market for legalized marijuana, is that the only source of total cost to firms? Is it the total cost to society (i.e. any firm-oriented externalities)? 4. Is the tax-revenue relevant in the cost-benefit analysis? 5. Assume the highest-valued alternative is to legalize only for medical use. For the policy from illegal use to legalizing for recreational use, do you think the benefits will exceed the costs? Why or why not?

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A cost benefit analysis is the analysis where a policy is evaluated in terms of cost it would incur and the benefits it would render to the society. If the cost is generally higher, then that policy is not approved. Cost Benefit analysis is important to analyze the ultimate impact the new rules/ policy is going to make on society or economic condition. A policy can only be desirable only if there is a recognizable positive net social benefit. Marijuana has been related to criminal activities and other antisocial actions in the past. Now, if marijuana is legalized, it can impact either positively or negatively on the society. However, the benefit may include an enhanced level of action in regular market activities where buying and selling of marijuana can be conducted, creating an economic boost.