1. In each case listed below, can you rationalize the government policy on the basis of

welfare economics?

a. In Los Angeles, the police respond to 127 ,000 burglar alarm calls per year. There is no

charge. (97 percent of the alarms are false.)

b. Wool and mohair production is subsidized by the federal government.

c. The federal government regulates cherry frozen fruit pies, requiring that at least 25 percent of

each pie by weight contain cherries and that no more than 15 percent of the cherries be

blemished. There are no such regulations for apple, blueberry, or peach frozen pies.

d. In Washington, DC, you cannot become a hairdresser without a license from the city

government.

e. The National Energy Policy Act requires that all new toilets flush with only 1.6 gallons of

water. Most American homes have toilets that consume 5.5 to 7 gallons per flush.

f The federal government subsidizes the production of electricity from chicken manure.

2. Recently, the California Insurance Commissioner proposed a regulation that would

reduce the ability of insurers to use geographic location in determining automobile

insurance rates. The change would raise the insurance rates of rural and suburban

residents, and lower the rates of urban residents. Is such a policy efficient? Is it likely to

improve social welfare?