There are ten states in the democratic nation of Katlandia, and each state has ten thousand residents. Although incomes vary, each Katlandian pays a tax equal to the total cost of all government projects divided by the number of residents in the country. Currently, two states each have one army base. An army base adds $2 million to a state's local economy each year. In addition, in terms of increased security, the annual marginal benefit to Katlandia of having an additional army base is shown below. The total cost of an army base is $8 million per year.
Suppose the department of defense proposes to build a third base in the state of New Porkswick. The
state representative from New Porkswick will ________ this proposal because ________.
A. support; it is socially optimal for Katlandia to have a third army base.
B. not support; the benefits to his or her constituents would be smaller than the resulting increase in taxes.
C. not support; it is not socially optimal for Katlandia to have a third army base.
D. support; the benefits to his or her constituents would outweigh the resulting increase in taxes.
Answer: D
You might also like to view...
Refer to the figure below. In response to gradually falling inflation, this economy will eventually move from its short-run equilibrium to its long-run equilibrium. Graphically, this would be seen as
A. long-run aggregate supply shifting leftward B. Short-run aggregate supply shifting downward C. Aggregate demand shifting rightward D. Aggregate demand shifting leftward
If Billy's reservation price on a snowboard is $250, how many snowboards would he buy if the market price of snowboards is $500?
A. 0 B. 1 C. 2 D. The amount of snowboards purchased would depend on Billy's income.
Refer to the diagram. The equilibrium points shown in the diagram along with the price change that produced the shift of the budget line from ab to ac:
A. are consistent with a downsloping demand curve for product K.
B. imply that the consumer's money income has declined, but his or her real income has
increased.
C. imply consumer irrationality since the dearer product is being substituted for the cheaper
product.
D. suggest that K is an inferior good.
Refer to the given data. If the Fed reduced the reserve requirement from 20 percent to 16 percent, excess reserves in the commercial banking system would increase by _____ and the monetary multiplier would rise to ____.
Answer the question on the basis of the following consolidated balance sheet of the
commercial banking system. Assume that the reserve requirement is 20 percent. All figures
are in billions and each question should be answered independently of changes specified in all
preceding ones.
A. $10 billion; 5
B. $40 billion; 6.25
C. $10 billion; 10
D. $40 billion; 12.5