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. Apart from the value of the additional security to the nation, the state economy will benefit by ________ per resident, and each resident's taxes will increase by ________.

Question

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. Apart from the value of the additional security to the nation, the state economy will benefit by ________ per resident, and each resident's taxes will increase by ________.

Quizplus · Accepted Answer

The added benefit to each resident of New Porkswick is $200 (= $2M/10,000), and each resident's taxes will increase by $80 (= $8M/100,000).

There Are Ten States in the Democratic Nation of Katlandia