Prof. Bryan Caplan

Econ 370


HW#5 (please type; diagrams may be drawn by hand)


Answer all of the four Questions for each of the five Products.



1.      Highways

2.      Primary and university education

3.      Health care

4.      Food and drug inspection

5.      Cable television




1.      Discuss the externalities both positive and negative of laissez-faire market provision of this good. In practice, would government regulation or government ownership help solve these problems, or make them worse?


2.      What do you think is the most efficient method of providing the good: laissez-faire, regulation, government ownership, or some mixture of the three? Provide some details (2-3 sentences) about how the product would be most efficiently provided.


3.      We sub-divided efficiency problems into three groups: Ability problems, Knowledge problems, and Incentive problems. In which of the three areas does your suggested method of provision have the largest efficiency advantage compared to the alternatives? Why?


4.      Do the less efficient systems have any non-economic advantages (such as greater equality, freedom, security, justice, etc.) over the more efficient system? Are these sufficient to make you prefer the less efficient methods of provision?