Suppose Your Community Is Considering Using Public Money to Build

question 6

Multiple Choice

Suppose your community is considering using public money to build a new sports stadium for a new team that will only come to the community if it is built for them. Suppose you are watching a news broadcast in which the supporters are saying that it will enhance economic activity because of the increase in restaurant activity that will occur around the new stadium. Now suppose you hear that an independent economist is going to appear during the next segment. It is likely she will say

• A)the economic activity created in the area will make it worth the investment.
• B)there will be no new economic activity created.
• C)there will be no new economic activity created in net because the same amount of money will be spent in the city whether or not there is a team. It will simply substitute from the game to something else.
• D)it may be a short-term cost, but in the long term it will be worthwhile.