Would legalization make marijuana cheaper?

A law legalizing the recreational use of marijuana took effect on Dec. 6, 2012 in Seattle, Wash. Want to learn more? Check out these controlled substance pictures.
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According to Gallup's annual crime survey, in October 2011, half of Americans believed marijuana should be legal in the U.S., and 70 percent surveyed felt it should be legally used to treat pain and other conditions with a doctor's prescription [source: Newport]. That's quite a jump from about a decade earlier, when just 30 percent favored legalization in 2000, and from its days in 1960s counterculture when only 12 percent of Americans wanted to see the drug legalized [source: Mendes]. Legalizing marijuana would make it legal to buy a regulated amount (the recent legalization passed in Washington state limits each person to 1 ounce per week) and partake in the privacy of your own home, but it also opens the door to many questions about the sale and purchase of cannabis and cannabis products, including the one most consumers wonder: How much would legal marijuana cost?

There are a number of things that will influence the price of legal marijuana, including consumer demand and the number of retail outlets supplying marijuana products. While it's still an illegal drug in the eyes of the federal government, the amount of federal involvement and prosecution will also play a role in cost as well as the total generated revenue from state to state.

The two big factors in the cost of legal marijuana are production costs and taxes.

Let's talk about production costs first. With large-scale production, the price to produce a pound of marijuana could drop as low as 20 cents per pound, based on figures from Canada's industrial hemp farms, but that's not exactly an apples-to-apples comparison. When all production costs are factored in for marijuana growers, estimates per pound remain under $20 -- and that's for high-grade quality product [source: Yglesias]. While there's a considerable difference between 20 cents and $20, consider that at today's black market prices, a pound of mid-grade costs about $4,800. Currently, prices for an ounce of marijuana range from about $100 to $200 for an ounce of low-grade to upwards of $400 to $600 for high-end strains [source: Gieringer]. The cost of an ounce of mid-grade marijuana purchased illegally is $300 per ounce, and that could drop as low as $3 an ounce if legalized [source: Gieringer]. It's unlikely prices would drop so low, though, because there's another part of the equation: taxation.