The Itagi Computer Company based in Japan is looking to build an integrated circuit manufacturing facility in the US. Itagi Computer is concerned about the safety and well-being of its employees and wants to locate in a community with good schools. The company also wants the manufacturing plant to be profitable and is looking for subsidies from potential communities. Subsidies are often an effective way to entice new businesses to locate in the region and create jobs for citizens. Many communities, especially those with high unemployment, use this strategic incentive.

Bienville has faced chronic unemployment since the shoe factory closed due to intense competition from imports. City officials have been working on a deal to encourage Itagi to locate in Bienville. Itagi officials have identified a 200-acre undeveloped site. The city has agreed tentatively to buy the site for Itagi at a cost of \($500,000.\) Also, the city will not require Itagi to pay any property taxes on the factory for the first five years of operation. The property-tax deal will save Itagi \($13\) million in taxes over the five years.

This deal was leaked to the local newspaper. The headlines the next day were ‘Bienville Gives Away \($13.5\) million+ to Japanese Company.’

a. Do the headlines accurately describe the deal with Itagi?

b. What are the relevant costs and benefits to the citizens of Bienville of making this deal?