QUESTION 2 The Australian Government in the 2015-16 financial year is set to spend $31.9 billion dollars on national defence. There is talk that some of this money will go towards building submarines in South Australia, generating thousands of jobs for South Australia. Kevin is complaining to Henry that this is an inefficient use of money as no individual Australian values national defence at that level and that the spending is just to ensure government politicians get re-elected. Which of the following statements are true: Ⓒ Kevin is correct because we should horizontally sum the quantities when dealing with a public good. Kevin is incorrect if the vertical summation of Australian's individual MB from national defence exceeds the expenditure. Kevin is correct if the sum of the prices of individual's willingness to pay is less than the expenditure. Individual Australians' MB for the national defence expenditure can vary between individuals.

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