1. Markets operate efficiently when they are fully informed, completely free to make adjustments and the benefits and costs are "private". One of the real-world situations leading to "market failure" (inefficient outcomes) is when the benefits or costs are not solely impactful on the consumer. Use this to produce an economic explanation why many states require vehicle inspections that examine such things as braking efficiency and exhaust omissions.

2. One often hears the statement, "Government should operate like a business." Businesses focus on profit maximizing behavior and reasonably only consider the costs (costs) and benefits (revenues) to the business in the context of private decision making. In terms of evaluating public projects and their costs and benefits would such a decision process provide an appropriate basis for making economically efficient decisions? Explain the basis for your answer. In your explanation discuss what types of factors/issues might be important to government that would not matter to a business?

3. Bobby is off at college. He regularly comments that despite reducing his driving his weekly expense on gasoline is still $20. (His semester is 15 weeks.) Assume that his parents wish to give him a gift card for Christmas, use indifference analysis to clearly explain why Bobby would likely be happier with a VISA gift card for $300 versus a Shell Gas card of equal value? If one wants to consider the TOTAL impact on utility of both Bobby and his parents, why might the Shell card result in higher total utility than the VISA card? (Do not do indifference for the last part. Just state your reasoning.)