2. (Similar to Chapter 12, 38A) The nominal GDP in the country of Adra is currently $650 million. Production in Adra is unaffected by changes in tax rates until the rate hits 30%. At the rate of 30% and for every 5% increase in the tax rate, the GDP drops by $32 million. a) Complete the following table: TABLE 1 (completed) % Tax Rate GDP Tax Revenue $650 5 10 15 20 25 30 35 40 45 50 55 60 65 70 b) At what percentage tax rate will the tax revenue be maximized c) What will be that tax revenue (in millions)

2. (Similar to Chapter 12, 38A) The nominal GDP in the country of Adra is currently $650 million. Production in Adra is unaffected by changes in tax rates until the rate hits 30%. At the rate of 30% and for every 5% increase in the tax rate, the GDP drops by $32 million. a) Complete the following table: TABLE 1 (completed) % Tax Rate GDP Tax Revenue $650 5 10 15 20 25 30 35 40 45 50 55 60 65 70 b) At what percentage tax rate will the tax revenue be maximized c) What will be that tax revenue (in millions)

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter3: Economic Decision Makers

Section: Chapter Questions

Problem 3.11P

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