Final answer:
The statement is true; states and communities often compete to provide improved services at lower costs. This competition exists in various public sectors, such as garbage collection and education, where state entities may compete directly with private companies or via contracting. However, the push for efficiency can also lead to social costs like reduced workplace safety and underfunded unemployment insurance.
Step-by-step explanation:
The statement that states and communities compete to offer improved services at lower costs is generally true. In economics, competition is often viewed as a driving force that encourages efficiency and innovation. For instance, at the local level, governments may provide services like garbage collection or education either through state-run agencies or by contracting private firms. This creates a competitive environment where public entities compete with the private sector, which can stimulate them to offer improved services at reduced costs. However, when public entities compete with private companies, it is also recognized that in some cases, the level of efficiency may fall short compared to private firms, unless the public sector is actively engaging in competition with them.
Additionally, economic strategies such as the 'race-to-the-bottom' can have social costs. These costs include workers' safety and pay potentially suffering due to relaxed regulations, and issues such as underfunded unemployment insurance programs due to reductions in payroll taxes for employers. Some states also avoid expanding Medicaid out of concern for increased public spending and employer costs, reflecting the balance they try to maintain between attracting business growth and managing state resources.