101hwk3 - for/against the ban, but how the externality...

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Name:_______________________________ ECO 101 830 Principles of Microeconomics Homework #3 Due 3/9/2007 1. Here in CNY and where I grew up in St. Louis, most single-family homes have a basement. However in Tulsa, Oklahoma basements are virtually non-existent, despite the prevalence of tornadoes. Can we conclude that Okie’s are not rationally planning for the danger of tornadoes? Explain your answer using the elements of economic theory. 2. For over 3 years, New York State has banned smoking in bars and restaurants. The owners of these establishments have bitterly complained about the government intrusion into their businesses, while smokers feel their rights are being violated. Use the concept of externalities to construct an argument in favor of this smoking ban. (note: I am not asking whether you are
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Unformatted text preview: for/against the ban, but how the externality concept would work to justify regulation in this case.) 3. It is estimated that the Army Corps of Engineers will use almost $1 billion of worth of federal funds to reconstruct the New Orleans levees to withstand Category 5 hurricanes. Explain why flood control would be considered a public good. 4. Recently the FDA approved a vaccine for HPV manufactured by Merck Co. and will likely approved a similar vaccine made by GlaxoSmithKline this year. (HPV is a virus that causes most cases of cervical cancer in women.) Currently there is a huge debate in several states over requiring the vaccine for girls by age 12. a) What kind of market failure would support this regulation? Explain. b) What kind of government failures could result? Explain....
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101hwk3 - for/against the ban, but how the externality...

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