Refer to the figure below. The marginal cost of underreporting can be written as MC = X2 + 0.4.
(A)What is the maximum marginal tax level (t)possible that will ensure tax evasion is zero? (
B)If the marginal tax rate is equal to 0.56, how much income will be evaded?

Question

Refer to the figure below. The marginal cost of underreporting can be written as MC = X2 + 0.4.
  (A)What is the maximum marginal tax level (t)possible that will ensure tax evasion is zero? (
B)If the marginal tax rate is equal to 0.56, how much income will be evaded?

Quizplus · Accepted Answer

The Answer of Refer to the figure below. The marginal cost of underreporting can be written as MC = X2 + 0.4.
  (A)What is the maximum marginal tax level (t)possible that will ensure tax evasion is zero? (
B)If the marginal tax rate is equal to 0.56, how much income will be evaded?

Refer to the Figure Below