PrepTest 94+, Section 2, Question 20
Economist: When national governments dispense funds to local governments to spend on local projects, any local government can receive a greater proportion of government funds by creating more local projects than other local governments create on average. Due to this added incentive to create more local projects, overall government spending and taxation are greater everywhere than they would be if local governments funded projects entirely by themselves.
Economist: When national governments dispense funds to local governments to spend on local projects, any local government can receive a greater proportion of government funds by creating more local projects than other local governments create on average. Due to this added incentive to create more local projects, overall government spending and taxation are greater everywhere than they would be if local governments funded projects entirely by themselves.
Economist: When national governments dispense funds to local governments to spend on local projects, any local government can receive a greater proportion of government funds by creating more local projects than other local governments create on average. Due to this added incentive to create more local projects, overall government spending and taxation are greater everywhere than they would be if local governments funded projects entirely by themselves.
Economist: When national governments dispense funds to local governments to spend on local projects, any local government can receive a greater proportion of government funds by creating more local projects than other local governments create on average. Due to this added incentive to create more local projects, overall government spending and taxation are greater everywhere than they would be if local governments funded projects entirely by themselves.
Which one of the following most closely conforms to the proposition illustrated by the economist's statements?
A large company invests in a new technology that greatly improves its product. Smaller companies, individually unable to match the large company's investment, pool their resources and invest in the new technology in order to compete.
A national government finances an irrigation project in order to turn an arid valley into fertile farmland. The food grown in the valley reduces local prices, which helps consumers in the valley but hurts farmers elsewhere.
A sales manager offers prizes for the salesperson who sells the most products during a month. This causes each salesperson to try to undercut the prices of the other salespeople, and as a result profits are lower than they would otherwise be.
People pool their money to buy certain foods in bulk in order to get a volume discount and reduce their bills. But after doing this, they eat more than they used to and so spend the same amount of money on food as they did before they pooled it.
Several communities band together to build a large conference center. But the project nearly collapses as each community, because of the revenue the center will bring, fights to be the one in which it is built.
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