Question

If marijuana became legal to sell and consume, it would be reasonable to assume the following:...

If marijuana became legal to sell and consume, it would be reasonable to assume the following: Some suppliers who were selling marijuana illegally will continue to sell it on the black market to avoid paying taxes and/or don’t have the money or know-how to become a legalized distributor (i.e. start their own business). What do you think might happen to these suppliers in the long run? What can they do to stay in business?

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Answer #1

In short run, firms can earn economic profits. But in long run, there shall be more influx of new firms that would drag down price level by increasing supplies of Marijuana. Hence, it is most likely that black market may not survive in long run. There are chances of survival if price in black market continue to prevail below the price prevailing in legal market.

Further, market information may becomes easily available in long run that may lead to the legal actions against the black market. Further sellers in legal market may also take into account the price prevailing in illegal market.

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