The figure given below depicts the tax revenue for different tax rates applied by the government.?Figure 11.2

-Refer to Figure 11.2. If you were a member of the Congress that aims to increase tax revenue collections, what would you recommend if the current tax rate was 80 percent?
A) Increasing the tax rate to 100 percent
B) Decreasing the tax rate to 30 percent
C) Decreasing the tax rate to 70 percent
D) Increasing the tax rate to 90 percent
E) Decreasing the tax rate to zero percent

Question

The figure given below depicts the tax revenue for different tax rates applied by the government.?Figure 11.2
 
-Refer to Figure 11.2. If you were a member of the Congress that aims to increase tax revenue collections, what would you recommend if the current tax rate was 80 percent?
A) Increasing the tax rate to 100 percent 
B) Decreasing the tax rate to 30 percent 
C) Decreasing the tax rate to 70 percent 
D) Increasing the tax rate to 90 percent 
E) Decreasing the tax rate to zero percent

Quizplus · Accepted Answer

Based on the Laffer Curve concept, if the current tax rate is at 80 percent, reducing it to 70 percent could potentially increase tax revenue by encouraging more economic activity and compliance, as rates above a certain threshold can lead to diminishing returns.

The Figure Given Below Depicts the Tax Revenue for Different