-In the above figure, tax revenue is at a maximum when the tax rate is
A) 0 percent.
B) 30 percent.
C) 50 percent.
D) 100 percent.

Question

-In the above figure, tax revenue is at a maximum when the tax rate is
A) 0 percent. 
B) 30 percent. 
C) 50 percent. 
D) 100 percent.

Quizplus · Accepted Answer

The concept of maximizing tax revenue is often illustrated by the Laffer Curve, which suggests that there is an optimal tax rate that maximizes revenue without deterring the economic activity. A tax rate of 0% would yield no revenue, and a tax rate of 100% would discourage all economic activity, thus also yielding no revenue. Without seeing the specific figure mentioned, a common interpretation is that a moderate tax rate, such as 30%, could be near the peak of the Laffer Curve, thus maximizing tax revenue.

-In the Above Figure, Tax Revenue Is at a Maximum