Build a simple linear regression for (1) all 50 states, (2) Eastern Time zone states, (3) Central Time zone states, (4) Mountain Time zone states, and (5) Pacific, Alaska, and Hawaii Time zone states. Compare your results in all five parts and state your judgements. You may use charts and tables in the comparison. Your answers should have values for the coefficient of determination, AOV table, significance levels, residual plots, and the regression fit with their interpretations.

Data source: Kaiser Family Foundation, 4/20/2020, 5:38PM. (ET = eastern time, CT = central time, MT = mountain time, PT = Pacific time). Some states have a mix of two different time zones which I ignored here).

Currently, 11 states have legalized marijuana or cannabis for recreational use. Four more states, 1

including Arizona and New Jersey, are voting to legalize and tax recreational marijuana sales recently . The motivation for legalization includes allowing the government to use police resources against more serious crimes, removing illegal drug dealers, raising tax revenue, and treating addiction as a public health issue instead of a criminal issue.

Question 1

a. Taxing legal marijuana sales is attractive at a time when states are looking for ways to increase their

tax revenues. Illinois has collected more than $100 million in recreational marijuana tax revenue

2 since legalizing sales on Jan 1 this year .

Different states have different approaches toward taxing legal marijuana. Some states adopt an approach like a typical sales tax where the consumer pays a tax on the purchase price. For example, in Oregon, a consumer pays a tax of 17% of the purchase price.

Suppose the recreational marijuana market is perfectly competitive. Use a diagram to discuss the impact of the sales tax on marijuana in Oregon. (18%)

b. A major argument for legalization and taxation as a rational solution to illegal marijuana use is that

high tax would discourage users from consuming. Using over 23,000 actual transaction data,

3 economists have found that the price elasticity of demand for marijuana was about 0.70. Interpret

the price elasticity of demand. Is the demand for marijuana price elastic or inelastic? Does it make sense? If the government wants to reduce marijuana consumption by 20%, by how many percent the marijuana price must increase? (8%)

Currently, 11 states have legalized marijuana or cannabis for recreational use. Four more states, 1

including Arizona and New Jersey, are voting to legalize and tax recreational marijuana sales recently . The motivation for legalization includes allowing the government to use police resources against more serious crimes, removing illegal drug dealers, raising tax revenue, and treating addiction as a public health issue instead of a criminal issue.

Question 1

a. Taxing legal marijuana sales is attractive at a time when states are looking for ways to increase their

tax revenues. Illinois has collected more than $100 million in recreational marijuana tax revenue

2 since legalizing sales on Jan 1 this year .

Different states have different approaches toward taxing legal marijuana. Some states adopt an approach like a typical sales tax where the consumer pays a tax on the purchase price. For example, in Oregon, a consumer pays a tax of 17% of the purchase price.

Suppose the recreational marijuana market is perfectly competitive. Use a diagram to discuss the impact of the sales tax on marijuana in Oregon. (18%)

b. A major argument for legalization and taxation as a rational solution to illegal marijuana use is that

high tax would discourage users from consuming. Using over 23,000 actual transaction data,

3 economists have found that the price elasticity of demand for marijuana was about 0.70. Interpret

the price elasticity of demand. Is the demand for marijuana price elastic or inelastic? Does it make sense? If the government wants to reduce marijuana consumption by 20%, by how many percent the marijuana price must increase? (8%)

64) In 2014, the price of peanuts was rising, which lead peanut butter sellers and peanut butter buyers to expect the price of peanut butter would rise in the future. Suppose the effect on the buyers was larger than the effect on the sellers. Consequently, in the current market for peanut butter there is a   in the price of peanut butter and   in the quantity of peanut butter.
A) rise; a decrease
B) fall; an increase
C) rise; an increase
D) fall; a decrease
65) If the money price of wheat increases and no other prices change, the
A) relative price of wheat is unaffected.
B) demand for wheat increases.
C) relative price of wheat falls.
D) opportunity cost of wheat rises.

68) Redbox rents DVDs for $1 per day via self-service kiosks located across the United States. In 2007, each kiosk averaged about 50 rentals per day. Suppose Redbox increases their daily price to $1.50. What is the price elasticity of demand if rentals decrease by 20 per day?
A) 0.8
B) 1
C) 1.25
D) 1.33
69) When the government chooses to spend the tax dollars that it collects on homeland security, its choice
A) primarily affects who gets the goods and services produced.
B) illustrates that scarcity does not always exist.
C) involves a tradeoff of other goods and services such as education for more homeland security.

Which of the following statements is (are) correct?
(x) Price ceilings and price floors usually reduce the welfare of society because quantity demanded does not equal quantity supplied if the price control is binding.
(y) The particular price that results in quantity supplied being equal to quantity demanded is the best price because it maximizes the welfare of buyers and sellers.
(z) A result of welfare economics is that the equilibrium price of a product is considered to be the best price because it maximizes the combined welfare of buyers and sellers.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Suppose the United States changed its laws to allow for the legal sale of a kidney. According to the textbook, which of the following statements is (are) correct?
(x) If the government allowed a free market in organs for transplant then there would be an increase in the price of a kidney and a decrease in the shortage of kidneys for transplant.
(y) At present, the maximum legal price for a human kidney is $0. The price of $0 maximizes both producer surplus and consumer surplus.
(z) If the government allowed a free market for transplant organs such as kidneys to exist, critics argue that such a market would benefit the rich but not the poor.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Which of the following would be most likely to increase the supply of loanable funds and lead to low interest rates?

Sara is a 60-year-old Anglo female in reasonably good health. She wants to take out a $50,000 term (that is, straight death benefit) life insurance policy until she is 65. The policy will expire on her 65th birthday. The probability of death in a given year is provided by the Vital Statistics Section of the Statistical Abstract of the United States (116th Edition).

Sara is applying to Big Rock Insurance Company for her term insurance policy.

(a) What is the probability that Sara will die in her 60th year? (Use 5 decimal places.)


Using this probability and the $50,000 death benefit, what is the expected cost to Big Rock Insurance?
$

(b) Repeat part (a) for ages 61, 62, 63, and 64.

What would be the total expected cost to Big Rock Insurance over the years 60 through 64?
$

(c) If Big Rock Insurance wants to make a profit of $700 above the expected total cost paid out for Sara's death, how much should it charge for the policy?
$

(d) If Big Rock Insurance Company charges $5000 for the policy, how much profit does the company expect to make?
$

Sara is a 60-year-old Anglo female in reasonably good health. She wants to take out a $50,000 term (that is, straight death benefit) life insurance policy until she is 65. The policy will expire on her 65th birthday. The probability of death in a given year is provided by the Vital Statistics Section of the Statistical Abstract of the United States (116th Edition). x = age 60 61 62 63 64 P(death at this age) 0.00559 0.00959 0.00917 0.00900 0.01123 Sara is applying to Big Rock Insurance Company for her term insurance policy.

(a) What is the probability that Sara will die in her 60th year? (Use 5 decimal places.)

Using this probability and the $50,000 death benefit, what is the expected cost to Big Rock Insurance?
$  

(b) Repeat part (a) for ages 61, 62, 63, and 64.

61

62

63

64

What would be the total expected cost to Big Rock Insurance over the years 60 through 64?
$  

(c) If Big Rock Insurance wants to make a profit of $700 above the expected total cost paid out for Sara's death, how much should it charge for the policy?

(d) If Big Rock Insurance Company charges $5000 for the policy, how much profit does the company expect to make?

The following items are a simplified version of very recent balance sheet data relating to the Federal Reserve Bank of the United States of America:

Currency at issue $1,650bn

Accounts due to foreign central banks and others $83bn

Loans to private banks $130bn

Government securities $3,850bn

Government balance $407bn

Exchange settlement account balances $1,867bn

Net foreign currency reserves (and gold) $37bn

Other assets $30bn

1. Classify each of the above individually as either an asset or a liability of the Federal Reserve. .

2. Draw up a balance sheet for the Federal Reserve Bank, using the above data, recording Assets on the left, and Liabilities and Equity Capital on the right. Assume all the assets and liabilities of the Fed have been included in the above list. .

3. Calculate the equity capital of the Federal Reserve Bank. (1 mark).

4. Suppose the Federal Reserve makes a loan of $10bn to the Bank of New York Mellon, which is a private bank. How does this affect the balance sheet of the Federal Reserve? Which item or items change, and by how much? .

5. Suppose the Federal Reserve Bank pays a dividend of $20bn to the U.S. Federal Government. How does this affect the balance sheet of the Federal Reserve? Which item or items change, and by how much? .

6. Can the Federal Reserve Bank go bankrupt? If so, how could this happen? If not, why not? (1 mark).