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(Figure: Laffer Curve) the Graph Shows a Hypothetical Laffer Curve

Question 105

Multiple Choice

(Figure: Laffer Curve) The graph shows a hypothetical Laffer curve. If the tax rate is 80%: (Figure: Laffer Curve) The graph shows a hypothetical Laffer curve. If the tax rate is 80%: A) the government should reduce the rate to 50% to maximize tax revenue. B) the tax rate should be increased to 100% (all income is taken in taxes) to maximize tax collection. C) the tax rate is at its optimal level. D) the tax rate should be reduced to zero to maximize tax revenue.

A) the government should reduce the rate to 50% to maximize tax revenue.
B) the tax rate should be increased to 100% (all income is taken in taxes) to maximize tax collection.
C) the tax rate is at its optimal level.
D) the tax rate should be reduced to zero to maximize tax revenue.

Correct Answer: