Senator Dogood Is Pushing for the Construction of a New

question 203

Multiple Choice

Senator Dogood is pushing for the construction of a new military base in his state even though, from the standpoint of national security, it is clear that there are better places to locate the new military base. Economic theory would suggest that Senator Dogood is

• A) acting irrationally; he must not know that the base would be better located in a different state.
• B) acting rationally; he realizes that constructing the base in his state will increase his chances of getting reelected.
• C) acting rationally if the country is currently at war but is acting irrationally if the country is not at war.
• D) trying to do what is best for the country.

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Definitions:

Incidence of a Tax

The incidence of a tax refers to the distribution of the tax's economic burden among different stakeholders, such as consumers and producers.

Elasticity

A measure of how much the quantity demanded or supplied of a good responds to a change in price.

Price Ceiling

A legally imposed maximum price on goods or services, intended to keep prices affordable for consumers.

Shortage/Surplus

A surplus is the opposite of a shortage, occurring when the supply of a product or service exceeds its demand in a market.