Refer to Figure 4-11. On the Laffer curve shown, which of the following is true?

A) Tax revenue would increase if marginal tax rates were lowered from point C.
B) Tax revenue would decrease if marginal tax rates were lowered from point A.
C) Tax revenues are maximized at a tax rate corresponding to point B.
D) All of the above are true.

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Preeti Bhatt · Accepted Answer

Final Answer : D, Explanation :  The Laffer curve illustrates the relationship between tax rates and tax revenue. At point C, tax rates are too high, so lowering them increases revenue (A is true). At point A, tax rates are too low, so lowering them decreases revenue (B is true). Tax revenue is maximized at point B (C is true).

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