Chapter 02 _Rational Economic Behavior_

Chapter 02 _Rational Economic Behavior_ - Chapter 2 Private...

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1 Chapter 2 Private Costs and Benefits: Rational Economic Behavior Introduction Consider a typical day in your life. From the time you get up in the morning to the time you go to bed at night you are affected by a lot of government microeconomic policies. Think about the sequence of activities you carry out on a typical day after you wake up; almost all of these activities are affected by some government policy. Here is a partial list. You go to bathroom? The Energy Policy Act of 1992 regulates the water flow from the toilet tank. The price of water is regulated by state and city governments. The Americans with Disabilities Act regulates the shapes and sizes of the toilet tanks in the government and commercial buildings. You wash your hands and take shower afterwards? The Federal Energy Policy Act of 1992 mandates that " all faucet fixtures manufactured in the United States restrict maximum water flow at or below 2.5 gallons per minute (gpm) at 80 pounds per square inch (psi) of water pressure or 2.2 gpm at 60 psi .“ You turn on the heater or the air conditioner and make a little breakfast for yourself? The prices of electricity and natural gas are regulated by state governments. The price of milk is also regulated by most states. The government requires producers of cereals to write the information about the ingredients on the box. The price of bread is affected by all kinds of agricultural price support programs and subsidies. The fluoride in your tap water and vitamin D in your milk are your government’s doing. You go out, thinking that you left the government at home? Think again! The government follows you into the street. We have laws about wearing helmets while riding bicycles, buckling seat belts, and using child seats in the cars. The government also mandates automakers to install airbags in the cars. We have traffic laws and we can only buy unleaded gasoline. The government requires gas stations to post a little friendly notice that the chemicals in that locality may cause birth defects. In some cities public transportation is subsidized by the government. You go to school? Public education is free. The government subsidizes tuitions in certain colleges and universities. You can also receive low-interest student loans. Where do you live? We have rent control in some cities. Some local governments encourage construction of low-cost homes for low-income families. The federal government policy encourages provision of low-interest mortgage loans to low income families. We have truth-in-lending laws. You have to pay property taxes. We have all kinds of don’t-bother-your-neighbor city ordinances.
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2 You feel safe at home, somewhat? That is because the government provides national security as a well as law and order. The government also provides private property protection and court systems. We also have fire departments run by city governments. Why do we have so much government in our lives?
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Chapter 02 _Rational Economic Behavior_ - Chapter 2 Private...

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