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
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