Problem 1: Due to the housing bubble, many houses are now selling for much less than their selling price just two or three years ago. There is evidence that homeowners with virtually identical houses tend to ask more if they paid more for the house. What fallacy are they making?
Problem 2: The U.S. government subsidizes flood insurance because those who want to buy it live in the flood plain and cannot get it at reasonable rates. What inefficiency does this create?