978-0078023866 Chapter 8 Internet Exercise and Supplements Part 1

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Chapter 08 – Government Regulation of Business

Internet Exercise and Supplements

Answer to Internet Exercise (p. 373)

1. This can be a discussion based question. Some of the information which can be found at

http://en.wikipedia.org/wiki/Bicycle_helmets_in_New_Zealand is as follows. In New Zealand, the

response to the law was to decrease bicycling—a 19% decrease at a time when the population

increased by 11%. Despite the decline in bicycling, the number of biking head injuries did not

Student Projects

1. Find a reference to the Commerce Clause on the web. Who is referencing it and why? Find a news

story on the Internet that highlights a particular government regulation and its impact on a particular

business or industry. (The regulation could be local, state, federal or foreign.) Explain the impact on

the business or industry and the public policy argument supporting the existence of the regulation.

Supplemental Web Addresses

http://betobaccofree.hhs.gov/laws/ (A website about Tobacco Laws and Regulations)

http://www.cspinet.org/booze (Regulation efforts and results regarding the liquor industry)

Answers

Answers to Practicing Ethics: ‘Regulated Video Games?’ Questions (p. 331)

1. This is an opinion based question. The evidence on the effects of “excessive” video game use

among children is disturbing, but certainly not yet conclusive. For a brief, balanced overview of the

research, see Douglas Gentile, “Video Games Affect the Brain—for Better or Worse,” July 23, 2009.

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Chapter 08 – Government Regulation of Business

a. This is can be a discussion based question. A recent online Gallup poll of adolescents found

that 71% of teenage boys have played “Grand Theft Auto” and that twice as many boys who had

b. This can be a discussion based question. FAO Schwarz decided in late 2002 to withdraw all

video games from its Zany Brainy stores, citing a lack of suitable content for young children.

a. This is a discussion based question. China has chosen to censor online games, approving only

b. The Eighth Circuit found that video games are speech under the First Amendment and that St.

Louis County had not proven it had a compelling interest to support its restriction of the

a. This can be a discussion based question. Instead of protecting children from video games one

should give considerable amount of importance on regulating its use. It can be treated as a

b. Government intervention would be helpful when it comes to setting a strong framework for the

regulation of these games. Children can have access to games that they are not entitled to play.

5. Most cases it’s true, but the psychological and emotional condition, and also the age of the player

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Chapter 08 – Government Regulation of Business

Answer to ‘Steroids’ Question (p. 334)

1. This can be a discussion based question. An interesting point might be to return to this question after

Answers to ‘Bring Back Danger?’ Questions (p. 335)

1. This is an opinion based question. One should expect the boys to involve themselves in adventurous

2. This is an opinion based question. Girls are no less than boys and hence equal opportunities should

be provided to both boys and girls. Including either girls or boys in activities that make them

Answer to ‘Nullification’ Question (p. 342)

1. This is an opinion based question. If the states believe that the federal laws are unconstitutional then

Answers to ‘Big soda Ban’ Questions (p. 347)

1. This is an opinion based question. The idea of banning soda worldwide might be alarming to some

consumers. One should try to regulate its consumption instead of having a ban on it. Consumption of

a. Personal freedom is subjective and has been a point of conflict between liberals and

conservatives. There are numerous examples where the liberals have favored something that

b. This is an opinion based question. Student answers will vary.

3. Regulating a person’s habits in the name of good health become the moral and social duty when

Answers to ‘Cabs Need Rules?’ Questions (p. 348)

1. The decision to treat a CPNC as a privilege rather than a property is a significant one. Treating the

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Chapter 08 – Government Regulation of Business

2. Arguably, the cab industry suffers from market failure (imperfect information) in the sense that

passengers have no way of knowing, before entering a cab, whether the service they will receive is

Answers to ‘Agency Duties’ Questions (p. 355)

1. Government regulation embraces many functions such as directing or substantially influencing a

2. Arguably, yes, in that each social policy has an economic root. Realistically however, one might

assert that many regulatory policies are the product of the political process, rather than of a careful

Answers to ‘Parents’ Duty?’ Questions (p. 362)

1. This can be an opinion based Question. It’s not possible for the parents to to fully shield their children

from indecent broadcasting. Even though technology can limit the extent to which children get

2. Yes, the parents should find different methods to avoid the indecent material from reaching their

Answers to ‘FDA Ban on Menthol Cigarettes’ Question (p. 372)

1. This is an opinion based question. An FDA draft report found more than 80 percent of

African-Americans adolescent smokers using menthol brands and more than half of Hispanic

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Chapter 08 – Government Regulation of Business

Answers to ‘Cell Phone: A Deadly Distraction?’ Questions (p. 372)

a. This is an opinion based question. According to a Quinnipiac national poll, Americans favor a

federal ban on cell phone use (both hand held and hands free) while driving by a 63-34 percent

margin. Democrats favor the ban 70-28, Republicans 56-40, and independents 64-33. Ten

percent of respondents admitted to “very often” talking on a cell phone while driving, 21 percent

b. This can be a discussion based question. One should avoid multi-tasking when driving. Same

2. This is an opinion based question. Clearly, the market is calling for advanced dashboard technology,

a. This is an opinion based question. One cannot neglect his or her obsession with cellphones.

Knowingly or unknowingly people are dependent on cellphones as cellphones store data which

b. This can be a discussion based question. Again it may be useful to point students to the

purposes for regulation generally (e.g., market failures of imperfect information, monopoly,

Answers to ‘Your Life: $7 million?’ Questions (p. 368)

1. This is an opinion based question. Backover accidents cause an average of 229 deaths and more

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Chapter 08 – Government Regulation of Business

a. This can be a discussion based question. At a cost of $2 billion and at 100 lives saved annually,

the average cost of each life saved would be $20 million; well in excess of the $7-8 million value

established by Viscusi. We should also consider the relevant opportunity costs. Perhaps that $2

b. The idea of putting a price tag on one’s life is a little complex than what people think. Every

individual is different and they possess a certain level of intellect which cannot be treated as

Cases and Answers

Heart of Atlanta Motel v. United States, 379 U.S. 241 (1964) (p. 339)

Syllabus

Appellant owns and operates the Heart of Atlanta Motel which refuses to rent rooms to Negroes.

The appellant contends that Congress in passing the act exceeded its power to regulate

commerce under [Article I] of the Constitution of the United States.

The appellees countered by saying that the unavailability to Negroes of adequate

accommodations interferes significantly with interstate travel, and that Congress, under the

Commerce Clause, has power to remove such obstructions and restraints …

[A]ppellees proved the refusal of the motel to accept Negro transients after the passage of the act. The

district court sustained the constitutionality of the sections of the act under attack and issued a permanent

injunction… It restrained the appellant from “[r]efusing to accept Negroes as guests in the motel by

reason of their race or color” and from “[m]aking any distinction whatever upon the basis of race or color

in the availability of the goods, services, facilities, privileges, advantages, or accommodations offered or

made available to the guests of the motel, or to the general public, within or upon any of the premises of

the Heart of Atlanta Motel, Inc.”

Answers to ‘Heart of Atlanta v. United States’ Questions (p. 341)

1. This can be a discussion based question. The Commerce Clause afford the federal government the

authority to regulate a local business the activity sought to be regulated in this case is commerce that

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Chapter 08 – Government Regulation of Business

2. This can be a discussion based question. The discussion can be initiated by asking the students

these questions: Would the free market in combination with the personal ethical standards of

3. Racial policies affected the quantity and quality of interstate travel by blacks. The motel is readily

accessible to interstate highways. The motel advertises nationally. Seventy-five percent of its

4. “In short, the determinative test of the exercise of power by the Congress under the Commerce

5. In Katzenbach, a companion case to Heart of Atlanta, the Supreme Court upheld the federal

government’s right to enforce the Civil Rights Act in the local restaurant. The restaurant received a

6. The Court ruled that it did not need to deal with the “affected interstate commerce” theme because

the gold mine was so clearly engaged in interstate commerce. The shipment of substantial supplies

Granholm v. Heald, 544 U.S.460 (2005) (p.343)

Syllabus

This was a consolidation on appeal of two cases, from Michigan and New York, where state laws

were challenged which “had the object and effect” of allowing in-state wineries to sell directly to

consumers in that state, while prohibiting out-of-state wineries from doing the same. The Court

held that such state laws were unconstitutional in that they caused a discriminatory impact on

interstate commerce compared with intrastate commerce. The 21st Amendment allows states to

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Chapter 08 – Government Regulation of Business

regulate interstate aspects of the importation of alcohol into the state but does not permit

discriminatory regulations which are unsupported by legitimate state goals or such goals that

could be satisfied in other, non-discriminatory ways.

Answers to ‘Granholm v. Heald’ Questions (p.346)

a. The Court concluded that the New York and Michigan laws clearly constituted discrimination

against interstate commerce. States cannot burden interstate business to favor local business.

The Court pointed to the need to prevent “economic balkanization”.

Having found the liquor rules discriminatory and having found that the rules were not “saved” by

the 21st Amendment, the remaining question for the Court was whether the states had legitimate

b. The states’ primary justifications were keeping alcohol from minors and facilitating tax collection.

The Court found that the states provided little evidence that the purchase of wine over the

a. They could choose to allow all wineries to sell directly to consumers or they could choose to ban

all direct sales.

b. The ruling should benefit small wineries that often cannot get distribution deals. Consumers

probably won’t see immediate benefits because laws will need to be changed on a

3. The Court ruled that the flow control ordinance did not discriminate against interstate commerce.

First, discrimination involves a comparison of substantially similar entities, and here, the

government’s responsibility to protect the health, safety, and welfare of its citizens set it apart from

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Chapter 08 – Government Regulation of Business

a. This case is rooted in the Supremacy Clause. The federal government raised intergovernmental

b. Specifically, the state sought to prevent diversion of liquor from the military bases into the

civilian market. Broadly, the state established a liquor distribution system in order to discourage

c. The Court concluded that the state regulations do not violate the Supremacy Clause.

Reasoning: The state regulations serve a legitimate interest permitted under the 21st

Amendment and thus enjoy a strong presumption of validity. The regulations do not violate the

intergovernmental immunity doctrine because they do not regulate the government directly.

5. An attempt by Iowa to block the pumping of liquid manure from Missouri would be discrimination

Voyeur Dorm v. City of Tampa, 265 F. 3d 1232 (11th Cir. 2001); cert. den. 122 S.Ct.

1172 (2002) (p. 349)

Syllabus

Voyeur Dorm operated a subscription web site that provided a 24-hour-a-day internet

transmission portraying the lives of the residents of a house in Tampa. The women who lived

there were employees. During a 23 month period from 1998-2000, total sales were over $3

million. The Tampa Zoning Coordinator ruled that the use of the house for such purposes

constituted adult entertainment under Tampa’s zoning code, which was not permitted in the area,

which was zoned Residential Single Family. The coordinator’s ruling was upheld by the Variance

Review Board and the Tampa City Council. The owners of the house filed suit in district court,

which granted a summary judgment against the owners, who then appealed to the 11th Circuit.

The appellate court reversed and ruled that the zoning ordinance was only applicable to adult

entertainment in which customers physically attend the premises and, therefore, did not apply to

the Voyeur Dorm.

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