There are ten states in the democratic nation of Fatlandia, and each state has ten thousand residents. Although incomes vary, each Fatlandian 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 Fatlandia 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) not support; it is not socially optimal for Fatlandia to have a third army base.
B) support; it is socially optimal for Fatlandia to have a third army base.
C) not support; the benefits to his or her constituents would be smaller than the resulting increase in taxes.
D) support; the benefits to his or her constituents would outweigh the resulting increase in taxes.
Correct Answer:
Verified
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