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Unformatted text preview: Homework #1 Solutions Chapter 1 4. Average cost is $1.17(19.9/17). Marginal cost is $0. 5. (a) The state should allow the market to provide what people want. Since gambling is not mandatory, only those who want to gamble will do so. Tax revenues that arise from casino gambling are paid voluntarily. (b) Some argue that casino gambling is associated with criminal activity that has a cost to the community at large. In addition, gambling can be addictive, and sometimes entices those who can least afford it to participate. These concerns bear on the efficiency argument to the extent that there are costs from gambling not reflected in the price of gambling. These costs could potentially affect the community at large (e.g., more crime, the social cost of addiction) or the individual (to the extent that gambling creates unwanted addiction). The concern about the income bias of gambling (and the associated income bias of the tax revenue generated form gambling) is, in and of itself, an equity concern, not an efficiency one, although...
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- Spring '10